Key facts
- The BIK taxable value is calculated as list price × CO2 percentage.
- Zero-emission electric vehicles have a BIK rate of just 2% for 2025/26.
- The maximum BIK percentage is capped at 37% of list price.
- Employers pay Class 1A NI at 15% on the BIK value from April 2025.
- A separate fuel benefit charge applies if the employer provides private fuel (multiplier: £27,800 for 2025/26).
How Company Car BIK Works
When an employer provides a car that is available for an employee’s private use, the employee is taxed on a benefit in kind (BIK). The taxable amount is based on two factors: the car’s list price and its CO2 emissions.[1]
BIK taxable value = List price (P11D value) × Appropriate CO2 percentage
Employee tax = BIK value × marginal Income Tax rate
The P11D value is the car’s list price when new, including delivery charges, VAT, and any accessories fitted before the car was made available, but excluding the first-year registration fee and road tax (VED).
CO2 Bands and BIK Percentages (2025/26)
HMRC publishes BIK percentages based on the car’s CO2 emissions. The lower the emissions, the lower the BIK rate:[2]
| CO2 Emissions (g/km) | Electric Range | BIK Rate 2025/26 |
|---|---|---|
| 0 | N/A | 2% |
| 1–50 | 130+ miles | 2% |
| 1–50 | 70–129 miles | 5% |
| 1–50 | 40–69 miles | 8% |
| 1–50 | 30–39 miles | 12% |
| 1–50 | <30 miles | 14% |
| 51–54 | — | 15% |
| 55–59 | — | 16% |
| 60–64 | — | 17% |
| 65–69 | — | 18% |
| 70–74 | — | 19% |
| 75–79 | — | 20% |
| 80–84 | — | 21% |
| 85–89 | — | 22% |
| 90–94 | — | 23% |
| 95–99 | — | 24% |
| 100–104 | — | 25% |
| 105–109 | — | 26% |
| 110–114 | — | 27% |
| 115–119 | — | 28% |
| 120–124 | — | 29% |
| 125–129 | — | 30% |
| 130–134 | — | 31% |
| 135–139 | — | 32% |
| 140–144 | — | 33% |
| 145–149 | — | 34% |
| 150–154 | — | 35% |
| 155–159 | — | 36% |
| 160+ | — | 37% |
Diesel cars that do not meet the Real Driving Emissions Step 2 (RDE2) standard have a 4% supplement added to the BIK percentage, up to the 37% maximum.
Worked Example
An employer provides a petrol car with a list price of £40,000 and CO2 emissions of 120 g/km:[1]
- List price: £40,000
- BIK rate (120–124 g/km): 29%
- Taxable benefit: £40,000 × 29% = £11,600
- Tax for 20% taxpayer: £11,600 × 20% = £2,320 per year
- Tax for 40% taxpayer: £11,600 × 40% = £4,640 per year
- Employer Class 1A NI: £11,600 × 15% = £1,740 per year
Compare this with a fully electric car at the same list price:
- BIK rate: 2%
- Taxable benefit: £40,000 × 2% = £800
- Tax for 20% taxpayer: £160 per year
- Tax for 40% taxpayer: £320 per year
P11D Reporting and Class 1A NI
Employers must report company car benefits on form P11D (or through payrolling) and pay Class 1A National Insurance at 15% on the taxable value.[3]
- P11D filing deadline: 6 July following the end of the tax year
- Class 1A NI payment deadline: 22 July (19 July by cheque)
- Employers must also give employees a copy of their P11D by 6 July
- Changes in company cars must be reported in real time if using payrolling
Fuel Benefit Charge
If the employer provides fuel for private use in a company car, a separate fuel benefit charge applies on top of the car BIK:[1]
Fuel benefit = £27,800 (2025/26 multiplier) × CO2 percentage
Using the 120 g/km petrol car example above:
- Fuel benefit: £27,800 × 29% = £8,062
- Additional tax (20% taxpayer): £1,612 per year
The fuel benefit charge applies in full even if only a small amount of private fuel is provided. The employee can avoid the charge entirely by reimbursing the employer for all private fuel used.
Tip: For many employees, the fuel benefit charge exceeds the actual value of private fuel received. It is often more tax-efficient for employees to pay for their own private fuel and only claim mileage at HMRC’s advisory fuel rates for business journeys.
Pool Cars
A pool car is exempt from the company car BIK charge, but only if it meets all of the following conditions:
- Available for use by more than one employee
- Not ordinarily used by one employee to the exclusion of others
- Not normally kept at or near any employee’s home overnight
- Any private use is merely incidental to business use
HMRC applies these conditions strictly. A car that is regularly taken home by one individual is unlikely to qualify as a pool car.
Frequently Asked Questions
How is company car tax calculated?
The taxable benefit is the car’s list price (P11D value, including accessories but excluding first-year registration fee and vehicle excise duty) multiplied by the appropriate CO2 percentage. The employee then pays Income Tax on this amount at their marginal rate. For example, a car with a £35,000 list price and a 28% BIK rate gives a taxable benefit of £9,800. A 20% taxpayer would pay £1,960 per year.
What is the BIK rate for electric cars?
For 2025/26, zero-emission electric vehicles have a BIK rate of just 2%. This makes fully electric company cars extremely tax-efficient compared to petrol or diesel equivalents. The rate is set to increase to 3% in 2026/27 and 4% in 2027/28.
What is the fuel benefit charge?
If an employer provides fuel for private use in a company car, a separate fuel benefit charge applies. The charge is calculated as the fuel benefit multiplier (£27,800 for 2025/26) multiplied by the same CO2 percentage used for the car benefit. The employee can avoid this charge entirely by reimbursing the employer for all private fuel.
What is a pool car and is it taxable?
A pool car is not subject to the company car BIK charge if it meets strict conditions: it must be available for use by more than one employee, not ordinarily used by one employee to the exclusion of others, not normally kept at or near an employee’s home, and used only for business journeys.
Further Reading
- Benefits in Kind for Directors — BIK rules specific to company directors
- Allowable Expenses for CT — what your company can deduct for Corporation Tax
- NI on Benefits in Kind (Class 1A) — how employers pay NI on company car benefits
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