⚡ The short answer
A zero-emission company car is taxed at 4% of its P11D list price in 2026/27 — up from 3% last year, and set to rise to 5% in 2027/28, 7% in 2028/29 and 9% in 2029/30. The same driver choosing a petrol car in a typical band pays roughly eight times more in benefit-in-kind tax. On a £53,250 electric SUV that is £852 a year for a higher-rate taxpayer, against £6,603 for a petrol equivalent. The rate has gone up — the advantage has not gone away.
Company car tax is the single largest financial lever in UK electric car uptake, and the reason roughly three in five new company cars are now electric or plug-in hybrid. It is also the most commonly miscalculated figure in a job offer. This guide sets out the 2026/27 rates, the arithmetic, and the two vehicle tax costs that catch fleet drivers out after the BIK bill is agreed.
What changed on 6 April 2026
The 2026/27 tax year is the first since the Autumn Budget formalised the benefit-in-kind roadmap to the end of the decade, and several thresholds moved with it:
- Zero-emission cars: the appropriate percentage rose from 3% to 4% of P11D value.
- Petrol and diesel cars: bands now run from 17% at 51 g/km up to a 37% cap. The diesel supplement for cars that do not meet RDE2 remains +4 percentage points, still capped at 37%.
- Car fuel benefit multiplier: up from £28,200 to £29,200, used when an employer pays for private fuel.
- Van benefit charge: up from £4,020 to £4,170, with van fuel benefit at £798. Fully electric vans remain exempt from both.
- Approved mileage rates: for the first time in over a decade, the tax-free rate for cars and vans rose from 45p to 55p for the first 10,000 business miles (25p thereafter).
- Class 1A employer National Insurance: unchanged at 15% of the taxable benefit, up from 13.8% before April 2025.
How the calculation actually works
Three numbers produce the bill, and only one of them is negotiable:
Annual company car tax = P11D value × BIK percentage × your marginal income tax rate
The P11D value is the manufacturer's list price including VAT, delivery and factory-fitted options worth £100 or more, excluding the first registration fee and first year of VED. Critically it is the list price, not the discounted price actually paid, and it is fixed for the life of the car — so a large deposit contribution or a cheap lease deal does not reduce your tax bill by a penny.
The marginal rate is 20%, 40% or 45%. From 6 April 2027 the reporting route also changes, when payrolling of company car and fuel benefits becomes mandatory in place of the annual P11D cycle.
The 2026/27 rates
| Tax year | Zero-emission (0 g/km) | Petrol / diesel range |
|---|---|---|
| 2025/26 | 3% | 16%–37% |
| 2026/27 | 4% | 17%–37% |
| 2027/28 | 5% | 18% cap rising |
| 2028/29 | 7% | cap rises to 38% |
| 2029/30 | 9% | cap rises to 39% |
Plug-in hybrids emitting 1–50 g/km are still graded by their electric-only range in 2026/27. That range is the WLTP figure on the V5C, not the "combined" range quoted in advertising:
| Electric-only range | BIK 2026/27 | BIK 2027/28 | From 2028/29 |
|---|---|---|---|
| 130 miles or more | 4% | 5% | 18% |
| 70–129 miles | 7% | 8% | 18% |
| 40–69 miles | 10% | 11% | 18% |
| 30–39 miles | 14% | 15% | 18% |
| Under 30 miles | 16% | 17% | 18% |
That last column matters for anyone signing a four-year lease this autumn: range banding disappears in April 2028 and every plug-in hybrid lands at 18%, more than four times today's electric rate.
What it costs in practice
| Car | P11D | BIK | Basic rate (20%) | Higher rate (40%) |
|---|---|---|---|---|
| MINI Countryman E (electric) | £33,005 | 4% | £264/yr | £528/yr |
| Typical electric (e.g. ID.3 class) | £45,000 | 4% | £360/yr | £720/yr |
| BMW iX3 40 (electric) | £53,250 | 4% | £426/yr | £852/yr |
| Plug-in hybrid, 40–69 mile range | £45,000 | 10% | £900/yr | £1,800/yr |
| Plug-in hybrid, under 30 mile range | £45,000 | 16% | £1,440/yr | £2,880/yr |
| Petrol, typical mid-band | £45,000 | 31% | £2,790/yr | £5,580/yr |
The comparison that matters is the last two rows against the first three. At an identical £45,000 list price, a higher-rate taxpayer choosing electric over a typical petrol company car saves £4,860 a year in income tax alone — £405 a month, or roughly the cost of the lease itself on some models. At the £53,250 of the new BMW iX3 40, the gap widens to £5,751 a year. Model-by-model specs and ranges are in our electric car library, and the comparison tool will put any two shortlisted cars side by side.
Salary sacrifice, and who really pays the NI
Electric cars provided through a salary sacrifice arrangement keep their exemption from the Optional Remuneration Arrangement rules that strip the tax advantage from most other sacrificed benefits. That means the taxable value stays at 4% of list price rather than the greater of the benefit and the salary given up.
Two National Insurance effects do the heavy lifting. The employee saves 8p in NI for every £1 of salary sacrificed at basic rate, or 2p at higher rate, on top of the income tax saved. The employer separately saves 15% employer NI on the sacrificed salary, often shared back into the monthly cost of the car. The employer also pays Class 1A NI at 15% on the BIK value itself: on a £53,250 electric car at 4%, that is £319.50 a year. Our guide to EV salary sacrifice in the UK works through a full quote.
The two vehicle tax costs that follow the BIK bill
1. The Expensive Car Supplement. From 1 April 2026 the threshold for zero-emission cars rose from £40,000 to £50,000. Cars above it pay an extra £440 a year on top of the £200 standard EV rate, for years two to six of registration — around £640 a year in total. Fleet list prices have followed inflation past that line, so this is now a mainstream cost rather than an edge case. Our EV road tax guide explains the bands, and the road tax calculator returns the exact figure for any list price and registration date.
2. Pay-per-mile VED from 2028. From 1 April 2028 electric cars will be charged by distance rather than by registration: 3p per mile for battery-electric and hydrogen vehicles, and 1.5p per mile for plug-in hybrids. A 10,000-mile-a-year driver is looking at roughly £300, on top of the annual rate. For a company car driver that is a cost the employer normally absorbs, but it will show up in lease quotes agreed from next year.
Mileage rates: the 55p change
Not every business journey happens in the company car. Where an employee uses their own vehicle and claims tax-free approved mileage allowance payments, the rate for cars and vans rose on 6 April 2026 from 45p to 55p for the first 10,000 business miles: on 8,000 miles a year, £4,400 tax-free instead of £3,600. The charging cost calculator prices the energy; the charge point directory covers the public network for the trips where home charging is not an option.
The bottom line
The 4% rate is the highest a zero-emission company car has been taxed at, and drivers who signed a three-year deal in 2023 are seeing their bill rise. But the structure still favours electric overwhelmingly: 4% against a 17%–37% petrol range, with the petrol cap rising to 39% by 2029/30 while the electric rate reaches only 9%. For a higher-rate taxpayer the gap is measured in thousands of pounds a year — more than enough to absorb a higher list price.
The decisions that cut the bill are made before the car is ordered: keep the list price below the £50,000 supplement threshold where the shortlist allows, and get a salary sacrifice quote alongside a personal lease quote rather than assuming they are comparable. For the broader market, see our guide to the best electric cars in the UK for 2026, the pricing context in our BMW iX3 40 UK debut report, and our explainer on what the ZEV mandate review means for buyers.
Sources
HMRC — Work out the appropriate percentage for company car benefits (480: Appendix 2), updated 6 April 2026 (https://www.gov.uk/guidance/company-car-benefit-the-appropriate-percentage-480-appendix-2) · GOV.UK — Travel — mileage and fuel rates and allowances, updated 21 May 2026 (https://www.gov.uk/government/publications/rates-and-allowances-travel-mileage-and-fuel-allowances/travel-mileage-and-fuel-rates-and-allowances) · GOV.UK — Vehicle Excise Duty rate tables (https://www.gov.uk/vehicle-tax-rate-tables) · Volkswagen UK — Electric company car benefits add up (https://www.volkswagen.co.uk/en/finance-offers-and-fleet/business-and-fleet/company-car-drivers/electric-and-hybrid-benefits.html) · Autocar — How much does company car tax cost?, 3 July 2026 (https://www.autocar.co.uk/car-news/advice-company-cars/how-much-does-company-car-tax-cost) · BMW Group UK press release, 16 September 2026 (https://www.press.bmwgroup.com/united-kingdom/article/detail/T0460737EN_GB/bmw-ix3-40-to-make-uk-driving-debut-at-smmt-drive-live)
