Company Car Tax Calculator
✓ Verified for 2026/27Car & Income Details
Company car tax is calculated based on the car's P11D list price and its CO2 emissions band (Benefit-in-Kind rate). The BIK value is then taxed at your marginal income tax rate (20% or 40%).
BIK & Tax Breakdown
Useful Company Car Tax Guides
- Company Car Tax Explained: A Complete Guide to Benefit-in-Kind (BIK) Rates
- Electric Company Car Tax UK: 2026/27 Tax Bands & EV Incentives
- Company Car vs. Car Allowance: Which is More Tax-Efficient?
- How to Calculate Company Car Fuel Benefit (HMRC Rules)
- Double Cab Pickup Tax Rules: HMRC Commercial Vehicle Guidelines
How We Calculated This
- Input variables: Enter the relevant amounts, rates, or percentages in the form.
- Real-time breakdown: The calculator applies HMRC rules and thresholds for the 2026/27 tax year to process the values.
- Display outputs: The visual graphs, donut charts, and tables are compiled dynamically to show your net take-home and deductions.
Real-World Examples
A basic calculation applying standard UK tax bands and allowances.
Calculation runs based on standard HMRC rules.
Factoring in a percentage of salary sacrifice or pension contributions.
Deductions are calculated and adjusted accordingly.
Related Calculators
Frequently Asked Questions & Detailed Tax Guide
How is Company Car Tax calculated in the UK?
If your company provides you with a car for private use, this is classified as a Benefit in Kind (BIK) by HMRC. Company car tax is not calculated on the purchase price of the car or your monthly lease payments. Instead, it is calculated based on the car’s **P11D list price** (the manufacturer’s list price including VAT and options, before discounts) and its **BIK band percentage** (which depends on the car’s CO2 emissions). You pay tax on this BIK value at your marginal income tax rate (20%, 40%, or 45%).
What are the BIK bands for electric and hybrid cars?
To encourage green energy, HMRC sets very low BIK bands for low-emission cars:
- Electric Cars (0g/km): **2% BIK rate** for the 2026/27 tax year (increasing to 3% in 2027/28). This makes electric vehicles incredibly cheap to run as company cars.
- Hybrid Cars (1-50g/km): BIK rate ranges from 2% to 14% depending on the electric-only range (cars with a range over 130 miles get the 2% rate).
- Petrol/Diesel Cars: BIK rates scale up to **37%** for high-emission vehicles.
Step-by-Step Mathematical Calculation: Electric vs. Petrol
Let’s compare the company car tax for a higher-rate (40%) taxpayer choosing between an electric Tesla Model 3 (P11D value £42,000, 2% BIK) and a petrol BMW 3 Series (P11D value £40,000, 28% BIK):
Tesla Model 3 (Electric):
- 1. P11D Value: £42,000
- 2. BIK Rate: 2%
- 3. BIK taxable value: £42,000 * 2% = £840.
- 4. Annual Tax due at 40%: £840 * 40% = **£336 per year** (**£28 per month**!).
BMW 3 Series (Petrol):
- 1. P11D Value: £40,000
- 2. BIK Rate: 28%
- 3. BIK taxable value: £40,000 * 28% = £11,200.
- 4. Annual Tax due at 40%: £11,200 * 40% = **£4,480 per year** (**£373.33 per month**!).
- Saving: Choosing the electric Tesla saves the employee **£4,144 per year** in tax!
Tax Expert Pro-Tips: Salary Sacrifice Car Schemes
David Vance, CTA FCA, recommends: “If your company offers a salary sacrifice car scheme, you can pay for an electric car lease out of your gross salary before tax. This reduces your taxable income, saving you 20% to 40% in tax and National Insurance, while only incurring the tiny 2% BIK tax on the car. This is currently one of the most popular and tax-efficient employee benefits in the UK.”
Legislative References
- Income Tax (Earnings and Pensions) Act 2003 – Chapter 6 (Taxation of company cars).
- HMRC Booklet 480: Expenses and benefits – Detailed valuation guidelines.