Company car tax: P11D value, BIK rate and income tax

What information do I need before choosing a company car?

For 2026/27, HMRC's appropriate percentage for a zero-emission company car is 4%. Apply that percentage to the relevant car value to find the annual taxable benefit, then apply the income tax treatment appropriate to you. The percentage is not a direct deduction from your salary and the taxable benefit is not cash paid into your bank account.

Ask the fleet team for the exact specification, P11D value, certified CO2 figure, fuel type and any electric-only range used for tax. Similar model names can conceal different engines, batteries or options, and those differences can change the tax calculation. A dealer's leasing quotation may emphasise the employer's monthly rental while leaving out the employee's tax cost.

Also ask whether the car is provided in addition to salary, in exchange for salary, or instead of a cash allowance. Those arrangements can have different tax consequences. A comparison that includes only benefit-in-kind tax may omit the salary you give up, pension effects or other employment terms. Payroll should explain the complete deduction before you accept the car.

1. 1Obtain the exact vehicle specification and its P11D value from the employer or fleet provider.
2. 2Confirm the certified emissions, fuel type and electric range needed to select HMRC's percentage.
3. 3Check the percentage for each relevant tax year, then identify your own income tax position.
4. 4Ask payroll to show salary contributions, salary sacrifice and any fuel benefit separately from the company-car benefit.

Sources: [1] [2] [3] [4] [5] [6] [7] [8] [9] [10]

How do electric company car percentages change by tax year?

Use the percentage for the tax year in which the benefit is provided, not just the rate advertised when you order the car. A car retained across tax years can produce a changing bill even though its P11D value and your use remain the same. For a zero emission car the percentage is 3% in 2025/26, 4% in 2026/27, 5% in 2027/28, and the table of years ahead further down sets out every published figure.

Plug-in hybrids need more care than a zero-emission car. The certified electric-only range can select a different row for vehicles within the relevant low-CO2 band. Actual winter range, dashboard predictions and the distance you personally manage on a charge are not substitutes for the official value used by HMRC.

A percentage comparison is only part of a vehicle comparison. A higher-priced electric car can have a low percentage but still create a material benefit. Multiply each candidate's own value by its own percentage before comparing. Do not rank cars using a percentage from one model and a discounted purchase price from another.

Sources: [1] [2] [3] [4] [5] [6] [7] [8] [9] [10]

Why is the taxable benefit different from the tax I pay?

The benefit is added to the income on which you are taxed; it is not itself the tax bill. A simple single-rate illustration assumes that all the additional benefit falls within the stated income tax band. Where it crosses a band boundary, affects an allowance or interacts with other income, the actual result needs a fuller payroll or tax calculation.

The illustration below uses the car value already used in the site's sourced company-car data. The value is an example input rather than a claim about a particular car for sale. The arithmetic is explicitly calculated from that value and the published percentage. A real quotation must use the value of the exact car offered to you.

Sources: [1] [2] [3] [4] [5] [6] [7] [8] [9] [10]

What happens if the percentage changes while I keep the car?

A tax-year change can alter the appropriate percentage without a new car being delivered. Check the employer's illustration against the full period you expect to keep the car. If a lease crosses into years for which rates have been announced, use those published figures; do not project a future rate by extending the most recent annual increase.

Your own income tax position can change too. A pay rise, a move between Scottish and other UK income tax treatment, or another benefit can change the tax due on the same car benefit. An illustration that held your personal rate constant should say so. It is useful for isolating the vehicle-rate change, but it cannot predict every change in your take-home pay.

How do I check my payslip or tax code after receiving the car?

Ask whether your employer taxes the benefit through payroll or reports it through the other HMRC process it uses. That determines how the charge appears during the year. A change in take-home pay should be traceable to the car benefit, the chosen income tax treatment and any separate employee contribution. Ask payroll for the calculation if the deduction is not clear.

Check the date the car became available for private use and the details of any previous company car being replaced. A late notification can leave an old car on the record or omit the new one, with a later adjustment to tax. Keep handover and return evidence rather than trying to reconstruct dates from the first payment on a lease invoice.

If the information is wrong, correct it with payroll and use HMRC's company-car update service where appropriate. Do not remove a taxable benefit from your own records just because you rarely use the car privately. Availability for private use is central to the rules, and commuting is generally private use for this purpose.

1. 1Compare the vehicle value, percentage and availability dates used by payroll with the fleet paperwork.
2. 2Check whether private fuel, employee contributions and a previous car appear separately and correctly.
3. 3Ask payroll to correct reporting errors and check HMRC's record or tax code through the official service.
4. 4Retain the corrected calculation and check the next payslip or notice to confirm the change has been reflected.

Sources: [1] [2] [3] [4] [5] [6] [7] [8] [9] [10]

Do low mileage, holidays or working from home remove the benefit?

A car that remains available for private use does not become tax-free merely because you work from home, take public transport or leave it parked while on holiday. The rules are not a mileage meter for personal journeys. If an employer claims the car is available only for business, the restriction and actual use must support that position; commuting normally prevents a simple business-only description.

Periods when a car is unavailable can qualify for an adjustment, but HMRC's conditions need to be met. A car remaining available while you choose not to drive it is different from one that has been taken back and cannot be used. Ask payroll to apply the relevant conditions to recorded dates instead of deducting every holiday or unused month.

Employee payments also need to be classified correctly. A contribution towards the car's capital cost, a payment required for private use and a salary-sacrifice reduction are not interchangeable deductions. Ask which category applies and how payroll has treated it. Paying money towards a car does not automatically reduce the benefit by the same amount in every arrangement.

If fuel is provided, compare the separate tax on private fuel with the cost of buying it yourself. The benefit uses HMRC's multiplier and the car's appropriate percentage, not the amount you happened to consume. Reimbursing only part of private fuel generally does not produce a matching partial reduction. Agree a record-keeping and reimbursement method with the employer before assuming that the charge has been eliminated.

Sources: [1] [2] [3] [4] [5] [6] [7] [8] [9] [10]

Which figures determine company car tax?

The P11D value is the list price of the car including delivery, VAT and factory fitted options. It is not what your employer paid, and a fleet discount does not reduce it. Accessories added after registration are added to it, and a capital contribution you make towards the car is deducted from it up to a limit of five thousand pounds.

The appropriate percentage is HMRC's figure for that car in that tax year, taken from a published table. For most cars it comes from the CO2 figure. For cars emitting 1 to 50 g/km it comes from the electric only range instead, and for a zero emission car it is a single low figure.

Your marginal income tax rate is the last multiplier. A basic rate taxpayer pays twenty per cent of the benefit, a higher rate taxpayer forty. Scotland sets its own rates and bands, so a Scottish higher rate taxpayer pays forty two per cent and reaches that rate at a lower salary.

• Taxable benefit equals P11D value multiplied by the appropriate percentage.
• Income tax equals the taxable benefit multiplied by your marginal rate.
• The employer also pays Class 1A national insurance on the same benefit.

Sources: [1] [2] [3] [4] [5] [6] [7] [8] [9] [10]

Why does electric range affect plug-in hybrid company-car tax?

Every car emitting between 1 and 50 g/km is banded by how far it goes on the battery alone, not by its CO2 figure. Those bands run from 130 miles and above at the bottom to under 30 miles at the top.

The spread between the top and bottom of that range is very large. Two plug in hybrids with the same list price and the same CO2 figure can be four times apart on tax purely on the range certified on the certificate of conformity.

It is the single most consequential number on a plug in hybrid order form and the one least often quoted in a lease comparison. Ask for it in writing before signing, because it does not appear on the invoice and it decides four years of tax.

Sources: [1] [2] [3] [4] [5] [6] [7] [8] [9] [10]

Which diesel company cars attract a supplement?

A diesel car that is not certified to the RDE2 standard pays 4 percentage points more than its band. HMRC treats RDE2 and Euro 6d as the same thing for this purpose, and the certificate of conformity confirms which a car holds.

The supplement can never push the appropriate percentage above the year's overall cap, which is 37% for 2026/27. A car already at the cap pays the cap whether or not the supplement applies to it.

It applies to diesel cars only. A diesel hybrid, a plug in hybrid, a petrol, an LPG car and an electric car are never charged it, whichever engine sits under the bonnet.

Sources: [1] [2] [3] [4] [5] [6] [7] [8] [9] [10]

Does employer-paid private fuel create another tax charge?

Where an employer pays for private fuel there is a separate charge, and it is not related to how much fuel you actually use. A fixed multiplier is published each year and multiplied by the same appropriate percentage as the car.

That structure means the charge is identical whether you did two thousand private miles or twenty thousand. For most drivers the tax on the benefit costs more than buying the private fuel themselves, and the sum is worth doing rather than assuming free fuel is a perk.

There is no fuel benefit charge on an electric company car, because electricity is not a fuel for this purpose. An employer paying to charge a company electric car does not create a taxable fuel benefit.

• The fuel benefit is a fixed multiplier times the appropriate percentage, not a measure of fuel used.
• It is all or nothing: contribute nothing towards private fuel and you pay the full charge.
• Electricity is outside it, so charging a company electric car creates no fuel benefit.

Sources: [1] [2] [3] [4] [5] [6] [7] [8] [9] [10]

Which adjustments can reduce a company-car benefit?

HMRC's calculation has adjustments for qualifying contributions and periods of availability. Whether an adjustment applies depends on its conditions and evidence. A simple value-times-percentage illustration is a starting calculation, not a guaranteed upper limit once every employment arrangement has been considered.

A qualifying capital contribution can reduce the relevant value up to HMRC's limit. Unavailability reductions have specific conditions, so unused months cannot simply be deducted. Required payments for private use and genuine sharing arrangements also need the correct treatment. Ask payroll to apply HMRC's steps using the actual agreement and availability records.

Ask payroll to model any required private-use contribution before accepting the car. A qualifying payment can reduce the benefit, but a salary-sacrifice reduction is not automatically the same thing. Compare the cash you give up and the resulting tax together rather than describing the tax reduction as a saving without its cost.

Where can I check future company-car tax percentages?

The rates are published years ahead, which is unusual and useful, because a company car is chosen for three or four years rather than for the year you are in.

Zero emission cars rise by one percentage point a year through 2027/28, then to 7% in 2028/29 and 9% in 2029/30. Even at the end of that schedule an electric company car is charged at a fraction of a petrol equivalent, whose cap rises to 38% and then 39%.

Cars emitting 1 to 50 g/km lose the electric range split entirely from 2028/29 and move to a single flat 18%, then 19% in 2029/30. For a long range plug in hybrid on 10% now, that is a very large jump in one step, and anybody ordering one on a four year lease now will meet it before the lease ends.

Sources: [1] [2] [3] [4] [5] [6] [7] [8] [9] [10]