Company Car Tax UK 2026: BIK Rates and What Employees Pay

Company car tax UK — if you are provided with a company car, you pay tax on the benefit-in-kind (BIK) value. Understanding BIK rates is essential for making the most of your company car in 2026.

What Is Benefit-in-Kind (BIK) Tax?

Benefit-in-kind tax is paid by employees who are given a company car for private use. The taxable benefit is calculated as a percentage of the vehicle's list price (P11D value), based on its CO2 emissions. The percentage rate — called the BIK rate — determines how much income tax you owe on the benefit each year.

Company Car BIK Rates 2026

BIK rates for company cars are determined by the vehicle's CO2 emissions. Pure electric vehicles with 0g/km pay the lowest rate at 2% in 2026. Petrol and diesel company cars with high emissions can attract BIK rates of up to 37%.

How to Calculate Your BIK Tax

Your annual BIK tax liability is calculated as: P11D value × BIK rate × your marginal income tax rate. For example, a company car with a £40,000 list price and a 15% BIK rate gives a BIK value of £6,000. At 40% income tax, you pay £2,400/year in company car tax. Related: Company Car Tax UK 2026 | Company Car vs Private Car Tax UK 2026 | Car Tax | UK Company Car Benefit 2026.

Electric Company Cars: The Best BIK Deal

Electric company cars attract a BIK rate of just 2% in 2026 — the lowest available. A £50,000 EV used as a company car has a BIK value of £1,000/year. At 40% tax, that is £400/year. Compare that to a £50,000 petrol car at 35% BIK: £17,500 BIK value = £7,000/year in BIK tax. The saving is dramatic.

Conclusion

Company car tax UK can be minimised by choosing low-CO2 vehicles. EVs at 2% BIK are the most tax-efficient. GOV.UK provides full BIK rate tables for all CO2 bands.

Vehicle Excise Duty (VED) rates in the UK are reviewed annually, typically in April with the new financial year. The DVLA administers all vehicle taxation and registration, and you can check your vehicle's current tax status for free at gov.uk/check-vehicle-tax using only your registration number. Rates are determined by the vehicle's CO2 emissions and list price at the time of first registration, with additional premiums applying for high-value vehicles.

Frequently Asked Questions

Q: How much is car tax (VED) in the UK 2026?
Car tax rates in the UK depend on your vehicle's CO2 emissions and list price. Standard rates start from £190 per year for petrol and diesel cars, with zero-rated VED for EVs. First-year rates vary from £0 to £2,605 depending on emissions. Additional premiums apply for vehicles over £40,000.

Q: How do I check if my car is taxed online?
You can check your vehicle's tax status for free on the Gov.uk website at gov.uk/check-vehicle-tax. You'll need your vehicle's registration number (number plate). You can also check via the Motor Insurance Database to verify road tax and insurance status simultaneously.

Q: Can I get a refund on car tax if I sell my vehicle?
Yes — if you sell or scrap your vehicle, you can claim a refund on any full months of remaining road tax. Contact DVLA with the V11 reminder letter or apply online at gov.uk. Refunds are usually processed within 4-6 weeks.

Q: Is road tax refund available when transferring ownership?
No — road tax does not transfer with the vehicle. When you sell your car, the tax is automatically cancelled and any remaining months are refunded to you by DVLA. The new owner must tax the vehicle immediately. As a buyer, always verify the vehicle's tax status before purchasing.

Q: What is the luxury car tax threshold in the UK 2026?
The additional rate for vehicles over £40,000 (list price) adds £410 per year to standard VED rates for years 2-6 of registration. This surcharge brings the annual cost for high-emission vehicles over £40,000 to around £600-690 per year. Pure EVs under £40,000 pay zero VED.

Questions

How is road tax calculated in India?

Road tax in India is calculated based on the vehicle's ex-showroom price, engine capacity, and state-specific rates. Most states charge road tax as a percentage of the vehicle value (typically 2-10%) or at fixed rates based on vehicle category. Some states offer concessions for electric vehicles and hybrid cars. Road tax is a one-time payment for private vehicles in most states.

Is road tax the same across all states in India?

No, road tax varies significantly across Indian states. Each state has its own road tax structure with different rates and calculation methods. For example, Karnataka charges 2% for cars while Maharashtra charges up to 8%. Some states like Delhi have lower road tax rates. Always check your state's specific road tax rates before purchasing a vehicle.

How to pay road tax online?

Road tax can be paid online through the Parivahan portal, state transport department websites, or VAHAN portal. Select 'Tax Payment' service, enter vehicle registration number, calculate applicable tax, make online payment, and download the receipt. For interstate purchases, road tax is paid at the time of registration in the new state.

What happens if road tax is not paid?

Failure to pay road tax can result in penalties, vehicle seizure, and fines during traffic checks. Road tax default may also affect vehicle insurance validity and renewal. Some states impose ongoing annual tax for commercial vehicles. Always carry proof of road tax payment while driving.

Can road tax be claimed back when selling a vehicle?

In most Indian states, road tax is non-refundable upon vehicle sale. The tax is considered paid for the remaining validity period but cannot be claimed back. Some states allow refund of unused road tax period when transferring registration to another state. Check with your state's transport department for refund policies.