When employees receive a company car for personal use, they are taxed on the Benefit in Kind (BIK). The tax paid on a company car BIK is commonly referred to as Company Car Tax (CCT).
Benefit-in-Kind (BIK) is a tax employees must pay when they receive a perk or benefit from their employer that is not included in their standard salary, such as a company car available for private use.
The annual BIK tax is calculated using a simple three-step formula:
Identify the car's P11D value (the manufacturer's list price including VAT, delivery charges, and factory-fitted optional extras, but excluding first-year road tax and registration fees).
Find the vehicle's HMRC tax band percentage, which is determined entirely by its carbon dioxide (CO₂) emissions and electric-only driving range.
Multiply the P11D value by the BIK percentage, then multiply that total by your personal income tax bracket (e.g. 20%, 40%, or 45%).
Choosing a highly efficient or fully electric car significantly lowers your BIK percentage, which keeps your monthly tax footprint remarkably low while maximising your take-home pay.
The BIK bands below apply to vehicles registered after 1 April 2020 (WLTP testing standards).
From April 2028, HMRC is eliminating the sliding scale for plug-in hybrids (1–50g/km). All hybrid vehicles in this emission bracket will be subject to a flat 18% rate for 2028/29, rising to 19% the following year.
| CO₂ (g/km) | Electric Range (Miles) | 2025/26 (%) | 2026/27 (Current) (%) | 2027/28 (%) | 2028/29 (%) | 2029/30 (%) |
|---|---|---|---|---|---|---|
| 0 (Pure EV) | N/A | 3% | 4% | 5% | 7% | 9% |
| 1–50 | More than 130 | 3% | 4% | 5% | 18% | 19% |
| 1–50 | 70–129 | 6% | 7% | 8% | 18% | 19% |
| 1–50 | 40–69 | 9% | 10% | 11% | 18% | 19% |
| 1–50 | 30–39 | 13% | 14% | 15% | 18% | 19% |
| 1–50 | Less than 30 | 15% | 16% | 17% | 18% | 19% |
| 51–54 | N/A | 16% | 17% | 18% | 19% | 20% |
| 155+ (Max Bracket) | N/A | 37% | 37% | 37% | 38% | 39% |
When an employee is provided with a company car benefit, the employer must pay Class 1A National Insurance Contributions on the value of that benefit, as a result, the standard rate for Employer’s Class 1A NICs on BIK items is 15%
The official electric range refers to the maximum distance a car can travel purely on battery power before it requires a recharge. This figure is taken directly from the vehicle’s official UK approval certificate or EC certificate of conformity based on standardized WLTP laboratory tests.
Your tax payment depends directly on your salary bracket. Once the annual monetary value of the benefit is calculated (P11D value multiplied by the BIK percentage), a basic-rate taxpayer pays 20% of that value over the year, while a higher-rate taxpayer pays 40%.
This is usually collected automatically by adjusting your monthly tax code.
The most effective strategy to reduce your company car tax is to choose a vehicle with zero or ultra-low emissions. Selecting a fully electric vehicle keeps your tax rate at just 4% for the current tax year.
You can also minimise costs by avoiding expensive optional factory add-ons, which inflate the underlying P11D value.
Benefit in Kind (BIK) is the tax you pay for having the use of a company vehicle outside of business use. This includes any social or private use and includes commuting to work. Benefit in Kind is based on a vehicle’s value (P11D), its CO2 emissions, and your tax band. The table below shows you what percentage of the P11D you will pay as tax (first column) based on the CO2 emissions of your car. Notice below that the CO2 g/km ranges change yearly, you will need to keep track of these changes if you want to understand how much tax you will be paying year on year.