UK Company Car BIK tax estimate.
Annual BIK tax
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Taxable benefit value
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Three numbers decide your tax bill
A company car you can use privately is a taxable benefit in kind, and HMRC works out the tax from just three inputs. The first is the P11D value, broadly the list price of the car plus delivery and any factory options, before any discount the employer negotiated. The second is the benefit-in-kind percentage, which is set by the car's CO2 emissions and fuel type. The third is your own marginal Income Tax rate. Multiply the three together and you have the annual tax. The tool does exactly that, then divides by twelve because the tax is collected month by month through your tax code under PAYE rather than as a separate bill.
The benefit value, the middle figure shown, is the amount HMRC treats as extra salary. It is added to your other income, which is why a company car can occasionally tip someone into a higher tax band or start eroding the personal allowance above £100,000.
Why an electric car changes everything
The BIK percentage is where petrol and electric diverge wildly. A fully electric car sits at just 3 percent for 2025/26, rising one point a year to 4 percent in 2026/27 and 5 percent in 2027/28. A typical petrol car emitting around 130g of CO2 per kilometre lands somewhere near 30 percent. On the same list price, the electric car generates a benefit value roughly a tenth the size, and therefore a tenth of the tax. This single gap is why salary-sacrifice EV schemes have exploded and why finance directors quietly drive electric. Type 3 into the BIK box for an EV and watch the number collapse.
A £35,000 petrol car for a higher-rate driver
Take the defaults: a car with a £35,000 P11D value, a 25 percent BIK rate, and a higher-rate taxpayer on 40 percent.
| Step | Figure |
|---|---|
| P11D value | £35,000 |
| Taxable benefit (£35,000 × 25%) | £8,750 |
| Tax on benefit (£8,750 × 40%) | £3,500 |
| Monthly cost via PAYE | £292 |
That is £3,500 a year, about £292 a month off the payslip. Now swap the BIK rate to 3 percent for an equivalent-priced electric car: the benefit falls to £1,050 and the annual tax to £420, around £35 a month. Same list price, a difference of more than £3,000 a year in the driver's pocket.
The Scottish wrinkle
The P11D value and the BIK percentage are set UK-wide, but the final multiplier, your marginal Income Tax rate, is not the same everywhere. Scotland sets its own income tax bands, and the higher and top rates differ from the rest of the UK. A Scottish taxpayer in the higher band pays 42 percent rather than 40, and the advanced and top rates climb further still. So the same car driven by a Scottish higher-rate taxpayer costs a little more in tax than the figure for the rest of the UK. If you pay Scottish Income Tax, enter your actual Scottish marginal rate in the rate box rather than assuming 40 percent.
Is there extra tax if my employer pays for fuel?
Yes, and it is often a bad deal. Free private fuel triggers a separate car fuel benefit, calculated as the same BIK percentage applied to a fixed multiplier set by HMRC each year, not your actual fuel use. Unless you do very high private mileage, the tax on the fuel benefit frequently costs more than the fuel itself, so many drivers decline employer fuel and reclaim only business mileage instead. This tool covers the car benefit, not the separate fuel benefit.
Does a capital contribution reduce the benefit?
It can. If you pay a lump sum toward the cost of the car, up to £5,000 of that contribution reduces the P11D value used in the calculation, which lowers the benefit and the tax every year you keep the car. Any private use payments you make to the employer also reduce the taxable benefit pound for pound. To model a capital contribution here, simply subtract it from the P11D figure before you enter it.