Your car and tax rate
HMRC only lets the first £5,000 reduce the taxable list price.
Estimated annual tax on the car benefit
£0
Monthly equivalent: £0
What this means
A low BIK percentage can still produce a meaningful tax cost once the list price is high. The fuel benefit is the big trap: if private fuel is provided and not fully reimbursed, it can add a surprisingly large tax bill.
Worked examples — see the maths on real numbers
How company car Benefit in Kind (BIK) tax works for petrol/diesel vs electric vehicles in 2026/27.
Nathan — petrol BMW 3 Series, higher-rate driver
| List price (P11D value) | £45,000 |
| BIK rate for petrol (mid CO2) | 32% |
| Taxable BIK | £45,000 × 32% = £14,400 |
| Driver income tax band | 40% |
The maths:
- Annual BIK tax: £14,400 × 40% = £5,760
- Equivalent to £480/month deducted via PAYE
- Plus employer NI (Class 1A) of 15% × £14,400 = £2,160 (paid by the employer)
- Plus fuel benefit if employer pays fuel: separately calculated and significant
Result: Nathan's company car costs him £5,760 a year in Income Tax on the benefit, about £480 a month through PAYE. Whether a cash car allowance and a privately owned car would leave him better off depends on the allowance offered and what the car would cost him to buy and run.
Olivia — Tesla Model Y EV, same higher-rate band
| List price (P11D value) | £50,000 |
| BIK rate for EVs 2026/27 | 4% (5% in 2027/28, 7% in 2028/29, 9% in 2029/30) |
| Taxable BIK | £50,000 × 4% = £2,000 |
| Driver income tax band | 40% |
The maths:
- Annual BIK tax: £2,000 × 40% = £800
- Equivalent to £67/month
- Business miles: if her employer repays them at no more than HMRC's advisory electric rate, there is no tax or Class 1A NI on the payments. From 1 September 2026 the rate is 7p a mile for home charging and 15p for public charging; HMRC reviews it every quarter (GOV.UK advisory fuel rates)
- Through a salary sacrifice scheme, the pay given up is not taxed as pay. For a car emitting no more than 75g/km, HMRC applies the normal benefit-in-kind charge, so the 4% BIK is what is taxed
Result: Olivia pays £800 a year in Income Tax on her £50,000 EV, about a seventh of Nathan's £5,760 on the petrol car. The gap narrows as the zero-emission rate rises: 5% in 2027/28, 7% in 2028/29 and 9% in 2029/30.
Figures use 2026/27 UK tax-year rates and thresholds. Always verify against your specific payslip or tax statement before acting.
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