What is company car Benefit-in-Kind?
A company car that’s available for private use (including commuting) is a taxable benefit in kind (BIK) — HMRC treats the private-use value as if it were salary. You pay income tax at your marginal rate on the BIK value; your employer pays Class 1A NI at 15% on top.
The BIK value is calculated as P11D list price × BIK percentage. The list price is the manufacturer’s price including VAT, delivery, registration fees and any optional extras — before any dealer discount. The BIK percentage depends on the car’s CO₂ emissions, fuel type and (for hybrids) electric-only range.
BIK rates for 2025/26
| Fuel / CO₂ band | Electric range | BIK rate |
|---|---|---|
| Fully electric (0g/km) | — | 3% |
| Plug-in hybrid 1–50g | 130+ miles | 3% |
| Plug-in hybrid 1–50g | 70–129 miles | 6% |
| Plug-in hybrid 1–50g | 40–69 miles | 9% |
| Plug-in hybrid 1–50g | 30–39 miles | 13% |
| Plug-in hybrid 1–50g | <30 miles | 15% |
| Petrol 51–54g/km | — | 16% |
| Petrol 100–104g/km | — | 26% |
| Petrol 120–124g/km | — | 30% |
| Petrol 155g/km+ | — | 37% (cap) |
| Diesel (non-RDE2) | Add 4% to above | Capped at 37% |
Full CO₂ band table: rates rise by 1 percentage point for each 5g/km band from 51g to 154g. Diesel vehicles that meet the Real Driving Emissions Step 2 (RDE2) standard use the petrol rates; non-RDE2 diesel adds 4%, capped at 37%. Most diesel cars sold in the UK since 2021 meet RDE2.
A higher-rate taxpayer with a £35,000 diesel-RDE2 car emitting 120g/km: BIK is 30% × £35,000 = £10,500 of taxable benefit. At 40% income tax, that’s £4,200 a year (£350/month) of income tax. The employer also pays £1,575 in Class 1A NI. Compare to an equivalent electric car at £35,000: BIK is 3% × £35,000 = £1,050, costing just £420/year in income tax. A £3,780/year difference for the same driver.— GoForma technical team, 2025/26 tax year modelling
When is a company car actually worth it?
Company cars were a staple of UK remuneration packages for decades, but rising BIK rates and the growth of flexible car-finance options have made the economics much tighter for petrol and diesel vehicles. As of 2025/26:
- Electric cars: usually a clear win. 3% BIK makes even a £50,000 EV cheap to drive personally, especially for higher-rate taxpayers.
- Plug-in hybrids with long EV range: 3–6% BIK for 70+ mile electric range makes some PHEVs competitive.
- Petrol/diesel under 100g/km: borderline; usually better than owning personally only if annual mileage is high and the private-car savings are real.
- Petrol/diesel over 150g/km: rarely tax-efficient. Most drivers do better taking a cash allowance and claiming AMAP mileage.
Fuel benefit — the other BIK
If your employer also provides fuel for private use (including commuting), that’s a separate BIK: the fuel benefit. For 2025/26, the figure is £28,200 × BIK% — so a 30% BIK diesel costs £8,460 of extra taxable benefit just for private fuel (£3,384/year at 40%). Nearly every driver is better off paying for their own private fuel and claiming mileage at the Advisory Fuel Rate or AMAP rate.
Workplace and home charging
Employer-provided charging at the workplace is tax-free for company cars and employee-owned cars, as long as the charge point is provided at or near the workplace. Home charge-point installation by the employer for a company-car driver is also typically tax-free (a recent HMRC concession). Home electricity for personal use is not reimbursable tax-free — the employer should pay the Advisory Electricity Rate (8p/mile for 2025/26) to cover business mileage only.