Company Car Tax (BIK) Calculator

The company car tax formula, step by step

Company car tax is income tax on a benefit in kind. HMRC values the benefit as the car’s list price multiplied by an “appropriate percentage” set by CO2 emissions, fuel type and, for plug-in hybrids, electric range. That value is added to your taxable income and taxed at your marginal rate.

• Start with the list price when new, including VAT, delivery and standard accessories, even if your employer got a discount.
• Add optional extras fitted to the car, such as upgraded wheels or a tow bar.
• Deduct any capital contribution you made towards the car, up to £5,000.
• Multiply by the appropriate percentage for the tax year.
• Reduce for any period of 30 consecutive days or more when the car was unavailable.
• Deduct any payments you make for private use, if paid by 6 July after the tax year.

Worked examples for 2026/27

The table shows annual tax at the 20% and 40% rates and the employer’s Class 1A NI at 15%. Notice how the petrol car costs far more in tax despite a lower list price.

Fuel benefit: often the most expensive part

If your employer pays for any private fuel, a separate fuel benefit applies: £29,200 × the car’s appropriate percentage. For the 30% petrol car above that is £8,760 of taxable benefit, costing a higher-rate taxpayer £3,504 a year whatever the mileage.

The charge disappears only if you repay the full cost of all private fuel, including commuting, by 6 July after the tax year. Partial repayments do not reduce it. Charging an electric or plug-in hybrid car at a workplace charge point is covered by a separate exemption.

Salary sacrifice cars and payrolling

Cars with CO2 emissions of 75 g/km or less – which covers electric cars and most plug-in hybrids – are taxed on the normal benefit value under salary sacrifice. Above 75 g/km, the taxable amount is the higher of the benefit value and the salary given up, which removes most of the saving.

From 6 April 2027 employers must payroll company car and fuel benefits, so tax will come through each payslip instead of being collected by reducing your tax code. Until then, tell HMRC when you get or hand back a car so your code is updated.

Electric company car tax over the next five years

Electric car benefit rates are rising each year. For a £40,000 electric car, the taxable benefit and tax look like this, based on the published appropriate percentages:

Company car or car allowance?

A car allowance is paid as salary, so it is taxed at your marginal rate and carries employee NI, and the employer pays employer NI on it. A company car is taxed only on the benefit value, with employer Class 1A NI but no employee NI.

For low-emission cars the company car usually wins. A higher-rate taxpayer taking a £6,000 allowance keeps about £3,480 after 40% tax and 2% NI. The electric car above costs £640 in tax in 2026/27, with insurance and maintenance usually included. For high-emission cars the benefit charge can exceed the value of the car to you, and an allowance plus mileage payments may be better.

Company vans

Vans with private use beyond commuting have a flat van benefit charge of £4,170 in 2026/27, costing £834 a year at 20% or £1,668 at 40%, whatever the van’s price. A separate flat charge applies if the employer pays for private fuel.