Company Car Tax UK:
BIK Rates for 2026/27
Company car Benefit in Kind (BIK) tax is based on the car's list price and CO2 emissions. Electric company cars now attract a 4% BIK rate, making them significantly cheaper than petrol or diesel for most employees.
How Company Car BIK Tax Is Calculated
The BIK Formula:
List price x BIK percentage x your income tax rate = annual company car tax
Worked example (basic rate taxpayer):
- Car list price: £30,000
- CO2: 140 g/km petrol = 33% BIK rate
- BIK taxable value: £30,000 x 33% = £9,900
- Annual tax (20% taxpayer): £9,900 x 20% = £1,980/year
- Monthly deduction from salary: £165
Electric car vs petrol comparison (same £40,000 list price, basic rate taxpayer):
Electric (4% BIK)
BIK value: £40,000 x 4% = £1,600
Annual tax: £1,600 x 20% = £320/year
Petrol (33% BIK)
BIK value: £40,000 x 33% = £13,200
Annual tax: £13,200 x 20% = £2,640/year
Choosing the electric car saves this employee £2,320/year in income tax.
BIK Calculator
BIK Rate
33%
Taxable BIK Value
£9,900
Annual Tax
£1,980
Monthly Tax
£165
Employer Class 1A NIC at 15%: £1,485/year. BIK rates for 2026/27 tax year.
BIK Rates Table: 2026/27 to 2029/30
| Category | 2026/27 | 2027/28 | 2028/29 | 2029/30 |
|---|---|---|---|---|
| Electric (0 g/km) | 4% | 5% | 7% | 9% |
| PHEV 130+ mile range | 6% | 7% | 9% | 11% |
| PHEV 70-129 mile range | 10% | 11% | 13% | 15% |
| PHEV 40-69 mile range | 14% | 15% | 17% | 19% |
| PHEV 30-39 mile range | 18% | 19% | 21% | 23% |
| PHEV under 30 mile range | 19% | 20% | 22% | 24% |
| Petrol/diesel 1-50 g/km | 19% | 20% | 22% | 24% |
| 51-75 g/km | 23% | 24% | 26% | 28% |
| 76-100 g/km | 28% | 29% | 31% | 33% |
| 101-125 g/km | 31% | 32% | 34% | 36% |
| 126-150 g/km | 33% | 34% | 36% | 38% |
| 151-175 g/km | 35% | 36% | 38% | 40% |
| Over 175 g/km | 37% | 38% | 40% | 42% |
Salary Sacrifice Schemes
A salary sacrifice arrangement lets employees give up part of their gross salary in exchange for a car through their employer. The employer leases the car and the employee's salary is reduced by the lease cost before tax and National Insurance are applied.
For electric vehicles, this is particularly attractive. The BIK rate is so low (4% in 2026/27) that the tax payable on the benefit is much less than the NI savings from the salary reduction. An employee choosing a £35,000 EV on salary sacrifice can save thousands of pounds per year compared to buying the same car personally.
Salary sacrifice schemes are offered by many large employers. The employer also benefits because they pay lower employer National Insurance on the reduced salary. Both sides can win, especially with EVs.
Employer Cost: Class 1A National Insurance
Employers must pay Class 1A National Insurance Contributions (NIC) on the BIK value of any company cars they provide. From 6 April 2026, the Class 1A NIC rate is 15% of the BIK value.
Electric (4% BIK, £40k car)
BIK value: £1,600
Employer NIC: £240/year
Petrol (33% BIK, £40k car)
BIK value: £13,200
Employer NIC: £1,980/year