Company Car Tax 2026/27: BiK Rates for Directors
Company car tax 2026/27 for UK directors: electric BiK at 4% rising to 9% by 2029/30, hybrid and petrol bands, Class 1A NIC, fuel benefit and 55p mileage.
Company car tax 2026/27 still favours electric cars by a wide margin. A zero-emission car carries a benefit in kind (BiK) rate of 4% this tax year, against up to 37% for a petrol or diesel model. That gap is why so many limited company directors now run an electric car through the business.
The gap is closing, though. Electric BiK rates are set to rise each year until 2029/30, hybrids face a sharp jump in April 2028, and from April 2027 most employers must run car benefits through payroll. This guide sets out the 2026/27 figures, shows how to work out the tax, and compares a company car with using your own car and claiming mileage.
Company car tax 2026/27: how the BiK is worked out
A company car that is available for private use is a taxable benefit. Home-to-office driving counts as private use. The taxable amount of the company car benefit in kind is called the cash equivalent.
The calculation has four steps:
- Take the list price. This is the manufacturer's list price when new, plus any optional extras. It is not what the company paid, and dealer discounts do not reduce it.
- Deduct any capital contribution. If you paid towards the car's cost yourself, up to £5,000 comes off the list price.
- Multiply by the appropriate percentage. This depends on the car's CO2 emissions and, for hybrids, its electric range.
- Adjust for the year. Reduce the figure if the car was not available for the whole year. Then deduct any amount you pay the company for private use.
You pay Income Tax on the result at your marginal rate. The company pays Class 1A National Insurance on the same figure. HMRC sets out the full method in its company car benefit guidance.
Electric car BiK rates 2026 and the rises to 2029/30
Electric car BiK rates for 2026 to 2027 sit at 4% for any car with zero CO2 emissions. That is one point higher than 2025/26. The government has already legislated or announced the next three years.
| Tax year | Zero-emission car | Hybrid (1–50 g/km) | Maximum rate |
|---|---|---|---|
| 2025/26 | 3% | 3% – 15% by electric range | 37% |
| 2026/27 | 4% | 4% – 16% by electric range | 37% |
| 2027/28 | 5% | 5% – 17% by electric range | 37% |
| 2028/29 | 7% | 18% (single rate) | 38% |
| 2029/30 | 9% | 19% (single rate) | 39% |
The 2028/29 and 2029/30 figures come from HMRC's company car tax rates policy paper for 2028 to 2030. It raises the zero-emission rate by 2 points a year and moves all 1–50 g/km hybrids to one flat rate. All other bands go up by 1 point a year.
Even at 9%, an electric car stays far cheaper to run as a company car than a petrol one. But a director signing a four-year lease today should budget for the 2029/30 rate, not the 2026/27 one.
Hybrid, petrol and diesel bands for 2026/27
Hybrid rates depend on the car's electric range. The shorter the range, the higher the percentage.
| CO2 (g/km) | Electric range | 2026/27 rate |
|---|---|---|
| 0 | n/a | 4% |
| 1 – 50 | 130 miles or more | 4% |
| 1 – 50 | 70 – 129 miles | 7% |
| 1 – 50 | 40 – 69 miles | 10% |
| 1 – 50 | 30 – 39 miles | 14% |
| 1 – 50 | Under 30 miles | 16% |
| 51 – 54 | n/a | 17% |
| 55 – 59 | n/a | 18% |
| 70 – 74 | n/a | 21% |
| 100 – 104 | n/a | 26% |
| 120 – 124 | n/a | 30% |
| 155 and above | n/a | 37% |
Above 55 g/km the rate rises by 1 point for each 5 g/km band until it hits the 37% cap. Round the CO2 figure down to the nearest 5 before you look it up. The full ready reckoner is in HMRC's Employment Income Manual at EIM24705.
The diesel supplement
Diesel cars pay an extra 4 points on top of the band rate, still capped at 37%. The supplement does not apply if the car meets the Real Driving Emissions 2 (RDE2) standard. Check the V5C or the manufacturer's paperwork before you assume either way.
The plug-in hybrid easement
Newer emissions tests (Euro 6e-bis) push up the official CO2 figures for many plug-in hybrids. To stop BiK rates jumping as a result, HMRC treats a qualifying plug-in hybrid as having CO2 of 1 g/km. The rate then follows its electric range. The car must be first registered from 1 January 2025 and before 6 April 2028, with official CO2 of 51 g/km or more. HMRC explains the conditions in EIM24710. The easement covers plug-in hybrids only, not mild or self-charging hybrids.
Class 1A NIC on a company car: worked examples
The benefit in kind on a company car costs twice. You pay Income Tax on it. The company pays Class 1A NIC at 15% for 2026/27, as set out in HMRC's rates and thresholds for employers. The Class 1A cost is a deductible expense for corporation tax.
Example 1: electric car, £45,000 list price, higher-rate director
- Taxable benefit: £45,000 × 4% = £1,800.
- Director's Income Tax at 40%: £720 a year.
- Company's Class 1A NIC at 15%: £270 a year.
Example 2: petrol car, £35,000 list price, 122 g/km, higher-rate director
- Round down to 120 g/km. The rate is 30%.
- Taxable benefit: £35,000 × 30% = £10,500.
- Director's Income Tax at 40%: £4,200 a year.
- Company's Class 1A NIC at 15%: £1,575 a year.
The petrol car is £10,000 cheaper to buy but costs the director almost six times as much in tax each year. That is the main reason electric cars dominate director fleets. Under company car tax 2026/27, the Class 1A NIC on the petrol car is also nearly six times higher for the company.
The car fuel benefit charge and vans
If the company pays for any private fuel in a petrol or diesel car, a second charge applies. The car fuel benefit charge for 2026/27 is the car's appropriate percentage multiplied by £29,200. For the petrol car above, that is £29,200 × 30% = £8,760. At 40% the director pays £3,504 in tax, and the company adds £1,314 of Class 1A.
The charge is all or nothing. It does not matter how little private fuel you use. You avoid it only by paying back the full cost of private fuel by 6 July after the tax year ends. Most directors are better off paying for private fuel themselves and claiming business fuel at HMRC's advisory fuel rates.
Electricity does not count as fuel for this charge. Charging an electric company car at work, or on a company charge card, does not create a fuel benefit.
Company vans
Vans use flat charges, not list prices. The figures for 2026/27 come from HMRC's van and fuel benefit charges policy paper:
- Van benefit charge: £4,170.
- Van fuel benefit charge: £798.
- Zero-emission vans: nil van benefit charge.
No charge applies if private use is limited to commuting and insignificant personal trips. Be careful with double-cab pick-ups. Since 6 April 2025 most are taxed as cars, not vans, with limited transitional relief for vehicles ordered before that date.
Salary sacrifice electric car schemes
Salary sacrifice normally gives no tax saving on benefits. Under the optional remuneration rules, the taxable value is the higher of the salary given up and the normal BiK figure.
Cars with CO2 of 75 g/km or less are carved out. For these, you always use the normal BiK rules, as HMRC confirms in its salary sacrifice guidance. So an employee who gives up £500 a month of salary for an electric car is taxed on the 4% BiK, not on the £6,000 a year of salary given up.
The employee saves Income Tax and employee NI on the salary given up. The company saves 15% employer NI on the same amount and pays 15% Class 1A only on the much smaller BiK. For companies with staff, a salary sacrifice electric car scheme is a low-cost perk to offer. For a sole director, the company simply providing the car usually achieves the same result with less paperwork. Keep an eye on the National Minimum Wage: cash pay after the sacrifice must not fall below it.
Company car or your own car and mileage?
The alternative is to own the car yourself and charge the company for business miles. HMRC raised the approved mileage rates for 2026/27, backdated to 6 April 2026:
- Cars and vans: 55p a mile for the first 10,000 business miles, then 25p.
- Passengers: 5p a mile extra per passenger.
These were 45p and 25p for every year from 2011 to 2026. The company pays the mileage tax-free, and the cost is deductible for corporation tax. A director doing 8,000 business miles can draw £4,400 tax-free. If the company pays less than the approved rate, you can claim Mileage Allowance Relief on the difference.
As a rough guide:
- High business mileage, petrol or diesel car. Personal ownership plus mileage usually wins.
- Electric car with modest business mileage. A company car usually wins, thanks to the 4% BiK and the 100% capital allowance.
- Low mileage, expensive car. Run the numbers both ways. The answer often turns on how much you would draw as dividends to fund a personal purchase.
Funding a personal car means drawing money out first, so dividend tax applies. See our limited company dividend tax 2026/27 guide for the current rates.
Capital allowances on company cars
How the company gets tax relief on the purchase depends on emissions. HMRC sets out the rules on its business cars capital allowances page:
| Car type | Relief |
|---|---|
| New and unused, zero emissions | 100% first-year allowance |
| Second-hand electric | Main rate, 14% a year |
| CO2 of 50 g/km or less | Main rate, 14% a year |
| CO2 over 50 g/km | Special rate, 6% a year |
The main rate fell from 18% to 14% from April 2026. Cars never qualify for the Annual Investment Allowance or full expensing.
The 100% first-year allowance for new zero-emission cars has been extended to 31 March 2027 for companies. The same extension covers workplace chargepoints. If you plan to buy an electric car, check gov.uk for any further extension before you leave the order until spring 2027. For how the allowance cuts your bill, see our UK corporation tax 2026 guide.
Leased cars
Most directors lease rather than buy. Lease rentals are deductible, but 15% of the rental is disallowed for cars with CO2 over 50 g/km. Electric and low-emission leases are fully deductible.
Selling a car that had the 100% allowance creates a balancing charge. The sale proceeds are added back to taxable profit in the year of sale. Plan disposals with this in mind.
Mandatory payrolling of benefits from April 2027
Today most companies report car benefits on a P11D by 6 July and pay Class 1A by 22 July after the tax year. That changes from 6 April 2027.
HMRC's guidance on the phased introduction of mandatory payrolling sets out two phases:
- Phase 1, from 6 April 2027: company cars, car fuel, vans, van fuel and employer-provided medical benefits.
- Phase 2, from 6 April 2028: most other benefits.
- Loans and accommodation: these are left out of the mandatory regime and stay voluntary.
So company car tax 2026/27 is the last full year most directors will see the car on a P11D. From April 2027 your payroll will tax the car benefit each pay period and report Class 1A in real time, as HMRC's RTI policy paper explains. Directors on a low salary need care here. If the monthly BiK is larger than the salary, the tax due may not fit inside the payslip. HMRC plans a one-year penalty easement for non-deliberate errors, but you should test your payroll set-up well before April 2027. Our guide to payrolling benefits in kind from 2027 covers the switch step by step, and our employer payroll guide covers PAYE basics.
Company car tax 2026/27 checklist
- Get the list price including extras, not the deal price.
- Find the official CO2 figure and, for a hybrid, the electric range.
- Work out the BiK for every year of the lease, using the rates to 2029/30.
- Add the company's Class 1A cost at 15%.
- Compare with owning the car and claiming 55p and 25p per business mile.
- Check capital allowance timing if you are buying outright.
- Make sure your payroll can handle car benefits from April 2027.
If you want the numbers run for your own company, our monthly accountancy plans include this kind of review.
Frequently asked questions
What is the BiK rate for an electric company car in 2026/27?
A fully electric car with zero CO2 emissions has an appropriate percentage of 4% for 2026/27. The rate rises to 5% in 2027/28, 7% in 2028/29 and 9% in 2029/30. Multiply the percentage by the car's list price to get the taxable benefit.
How much Class 1A NIC does my company pay on a company car?
The company pays Class 1A National Insurance at 15% on the taxable benefit for 2026/27. On an electric car with a £45,000 list price, the benefit is £1,800 and the Class 1A bill is £270. The director pays no employee NI on the car.
Does the car fuel benefit charge apply to electric cars?
No. Electricity is not treated as fuel for the car fuel benefit charge, so charging an electric company car does not trigger it. The charge applies to petrol and diesel cars where the company pays for private fuel. For 2026/27 it is the car's appropriate percentage multiplied by £29,200.
What is the approved mileage rate for 2026/27?
HMRC raised the approved mileage rate for cars and vans to 55p per mile for the first 10,000 business miles, backdated to 6 April 2026. Business miles above 10,000 stay at 25p. The company can pay these rates tax-free when a director uses a personal car for business trips.
Can my company still claim 100% capital allowances on an electric car?
Yes, for now. The 100% first-year allowance for new and unused zero-emission cars runs to 31 March 2027 for companies. Second-hand electric cars get the main rate writing down allowance of 14% instead. Check gov.uk for any extension before you order a car close to the deadline.
When does payrolling company car benefits become mandatory?
From 6 April 2027 most employers must report company cars, car fuel, vans, van fuel and medical benefits through payroll in real time. Most other benefits follow from April 2028. The P11D route for these benefits ends once your payroll takes them over.
This article is general guidance, not personal tax advice. Speak to a qualified accountant before acting on it.