How is company car tax calculated?
A company car you can also use privately counts as a taxable benefit. Its P11D value, the list price including VAT, delivery and standard accessories, is multiplied by an "appropriate percentage" set by the car's CO2 emissions to give a taxable Benefit-in-Kind value. That figure is added to your income and taxed at your normal Income Tax rate.
For example, a car with a £35,000 P11D value and an appropriate percentage of 25% gives a taxable Benefit-in-Kind of £8,750, so a basic-rate (20%) taxpayer pays about £1,750 a year in extra Income Tax. Enter your own car and salary above for an exact figure.
How company car tax works
If your employer gives you a car to use privately as well as for work, it counts as a taxable benefit. Its P11D value (the car's list price including VAT, delivery and standard accessories) is multiplied by an “appropriate percentage” set by its CO2 emissions, to give a taxable Benefit-in-Kind (BIK) value. That BIK value is added to your income and taxed at your normal Income Tax rate, exactly like any other income.
For example, a £35,000 P11D value car with an appropriate percentage of 25% gives a taxable BIK of £8,750. A basic-rate (20%) taxpayer would then pay an extra £1,750 a year in Income Tax because of it.
How the appropriate percentage is set
Fully electric cars get the lowest rate. Plug-in hybrids with CO2 emissions between 1 and 50g/km get a rate based on their electric-only range: the further they can travel on electric power alone, the lower the rate. Petrol and diesel cars above 50g/km are taxed on a CO2 sliding scale, capped at 37% for any car regardless of emissions. Non-RDE2 diesel cars get an extra 4 percentage point supplement on top.
No employee National Insurance on a company car
Unlike your salary, a company car benefit isn't subject to employee National Insurance. Your employer pays Class 1A National Insurance on it separately, calculated on the same BIK cash equivalent, but that's a cost to them, not a deduction from your pay. This calculator shows it as an informational figure only.
Company car vs. salary sacrifice car
This calculator assumes your employer gives you the car as a standard benefit, with no cash alternative or salary given up in exchange. If instead you're giving up part of your salary specifically to get the car (a salary sacrifice or “car allowance exchange” scheme), use the Salary Sacrifice Car Calculator instead, which models the full before/after take-home pay comparison and the salary sacrifice-specific OpRA rules.
Example company car tax calculations
Compare how a car's list price, emissions and your tax band affect the annual Benefit-in-Kind charge and monthly take-home pay.
Electric car, basic-rate
£40,000 P11D · 4% BIK rate
- Taxable BIK
- £1,600
- Extra tax / month
- £27
Petrol car, higher-rate
£30,000 P11D · 34% BIK rate
- Taxable BIK
- £10,200
- Extra tax / month
- £340
Plug-in hybrid
£35,000 P11D · 10% BIK rate
- Taxable BIK
- £3,500
- Extra tax / month
- £58
Older diesel, non-RDE2
£28,000 P11D · 34% BIK rate
- Taxable BIK
- £9,520
- Extra tax / month
- £159
Frequently asked questions
01How is company car tax calculated?
Your car's P11D value (its list price including VAT, delivery and standard accessories) is multiplied by an 'appropriate percentage' set by CO2 emissions (and electric range, for low-emission cars), to give a taxable Benefit-in-Kind (BIK) value. That BIK value is added to your income and taxed at your normal Income Tax rate, the same as any other income.
02Where do I find a company car's P11D value?
It's the car's list price, including VAT, delivery charges and the cost of any standard accessories, but excluding the first year's road tax and the vehicle registration fee. It's not the same as what your employer actually paid for the car (after any discount) - it's a standardised figure your employer reports to HMRC on form P11D each year.
03Do I pay National Insurance on a company car?
No, not as the employee. Only your employer pays National Insurance on your company car benefit, in the form of Class 1A National Insurance Contributions, calculated on the same BIK cash equivalent. This is a cost to your employer, not a deduction from your own pay.
04Why is my company car tax cheaper for an electric car?
Fully electric cars (0g/km CO2) get the lowest appropriate percentage, currently much lower than an equivalent petrol or diesel car. This is a deliberate government incentive to encourage electric company cars, and it's been gradually increasing from a very low starting rate in recent years, so check the current rate rather than assuming it stays fixed for the life of the car.
05Does a diesel car cost more in company car tax?
Yes, if it doesn't meet the RDE2 (Real Driving Emissions Step 2) emissions standard, which adds a percentage point supplement on top of the normal CO2-based rate. Most diesel cars registered from 2020 onwards do meet RDE2, so this mainly affects older diesel models; check your car's documents if you're unsure.
06What's the difference between this and the salary sacrifice car calculator?
This calculator covers a company car provided as a standard benefit, with no cash alternative or salary given up in exchange. If your employer is instead asking you to sacrifice part of your salary for the car, use the dedicated Salary Sacrifice Car Calculator instead, which models the full before/after comparison including the salary sacrifice-specific OpRA rules.
07Does a company car benefit affect my student loan repayments?
Yes. Unlike a genuine salary sacrifice arrangement, a company car provided as a standard benefit still counts as income for student loan repayment purposes, so it can increase your monthly student loan deduction if it pushes your income further above your plan's threshold. This calculator includes that if you select a student loan plan.
Benefit-in-Kind assumptions
This company car tax calculator assumes:
- You have unrestricted private use of the car for the full tax year, with no periods where it was unavailable, and no separate capital contribution or private-use payments made towards it (both of which can reduce the taxable BIK value in reality).
- Extra Income Tax is calculated using the marginal-rate method: your total tax with the BIK added to your salary, minus your tax on your salary alone.
- No employer-paid private fuel is included; a company car with private fuel paid for by your employer attracts an additional, separate Car Fuel Benefit charge not covered by this calculator.
- All figures are rounded to the nearest penny.
For a car funded through a genuine salary sacrifice scheme instead, see the Salary Sacrifice Car Calculator.
Sources
Company car Benefit-in-Kind rates for 2026/27 are taken directly from: