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.
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.