Fully electric cars now account for 51% of company car benefit recipients in the UK, 467,000 people out of 920,000, according to HMRC's latest benefit in kind statistics [1]. Across all benefits subject to Class 1A National Insurance, the total taxable value reached £9.5 billion, up £0.6 billion on the previous year [1].
Behind those totals sits a set of rates that decide how much tax a benefit generates. For company cars the key figure is the appropriate percentage, which runs from 4% for a zero-emission car to 37% for the most polluting models in the 2026-27 tax year [2]. Vans, fuel, loans and smaller perks each have their own fixed charges or thresholds, and the employer pays Class 1A National Insurance at 15% on all of them [4].
This guide gathers the benefit in kind (BIK) rates employers need in one place: the full company car table, the van and fuel charges, the loan and trivial benefit thresholds, worked examples of the tax and National Insurance a car generates, the scheduled rises to the 2029-30 tax year, and the reporting changes that arrive with mandatory payrolling.
Key takeaways
- Company car BIK rates for the 2026-27 tax year run from 4% for zero-emission cars to a maximum of 37%, with a 4% supplement on most diesel cars [2].
- The van benefit charge is £4,170, the van fuel benefit charge £798 and the car fuel benefit multiplier £29,200 for the 2026-27 tax year [3].
- Employers pay Class 1A National Insurance at 15% on the cash equivalent of every reportable benefit [4].
- The zero-emission car rate rises by 1 point in 2027-28 and by 2 points a year after that, while hybrids in the 1 to 50g/km band move to 18% in 2028-29 and 19% in 2029-30 [5] [6].
- Cars, fuel, vans, van fuel and medical benefits must be payrolled from 6 April 2027, with most other benefits following from 6 April 2028 [12].
What a BIK rate is and how it creates tax
A benefit in kind is a non-cash benefit an employee receives because of their employment, such as a company car, private medical insurance or a cheap loan [22]. The law does not tax the benefit at what it cost the employer. It taxes a statutory figure called the cash equivalent, and the BIK rate is the rule that produces that figure [17].
Two charges on one value
The same cash equivalent creates two separate charges. The employee pays income tax on it at their marginal rate, so the identical car costs a higher-rate taxpayer twice what it costs a basic-rate taxpayer [16] [18]. The employer pays Class 1A National Insurance at 15% on the same value, and the employee pays no National Insurance on it [4] [31].
The table summarises who pays what on a reportable benefit.
| Party | Charge | Basis |
|---|---|---|
| Employee | Income tax at 20%, 40% or 45% in England, Wales and Northern Ireland | Cash equivalent added to taxable income |
| Employee in Scotland | Income tax at the Scottish rates | Cash equivalent added to taxable income |
| Employer | Class 1A National Insurance at 15% | Cash equivalent of the benefit |
The income tax rates come from HMRC's rates page [18] and the Scottish rates from the Scottish income tax guidance [32], with the Class 1A rate from HMRC's employer rates for the 2026-27 tax year [4].
Three types of BIK rate
BIK rates come in three shapes. Company cars use a percentage of the list price that varies with CO2 emissions and electric range [2]. Vans and fuel use fixed annual charges set by statute and uprated with the Consumer Price Index [3]. Most other benefits, from medical insurance to gym memberships, are valued at the cost to the employer, with specific exemptions for small items and loans [22] [9].
Company car BIK rates for the 2026-27 tax year
The appropriate percentage depends on the car's CO2 figure and, for cars emitting 1 to 50g/km, on how far it can travel on electric power alone [2]. The table sets out the bands from HMRC's Employment Income Manual.
| CO2 (g/km) | Electric range (miles) | Appropriate percentage |
|---|---|---|
| 0 | Not applicable | 4% |
| 1 to 50 | 130 or more | 4% |
| 1 to 50 | 70 to 129 | 7% |
| 1 to 50 | 40 to 69 | 10% |
| 1 to 50 | 30 to 39 | 14% |
| 1 to 50 | Under 30 | 16% |
| 51 to 54 | Not applicable | 17% |
The bands are taken from HMRC's appropriate percentage table for the 2026-27 tax year [2].
Conventional cars above 54g/km
From 55g/km the percentage rises by one point for each 5g/km band, and from 75g/km to 79g/km it holds at 21% before resuming [2]. The table shows selected bands, with CO2 figures rounded down to the nearest 5g/km [2] [27].
| CO2 (g/km) | Appropriate percentage |
|---|---|
| 55 to 59 | 18% |
| 70 to 79 | 21% |
| 100 to 104 | 26% |
| 120 to 124 | 30% |
| 140 to 144 | 34% |
| 155 or more | 37% |
The selected rows come from HMRC's full table, which lists every 5g/km band [2].
The diesel supplement
Diesel cars carry a 4% supplement on top of the band percentage, capped at the 37% maximum [2]. Diesel cars certified to the RDE2 standard are exempt from the supplement, which makes the registration document an essential input to the payroll record [2] [27].
The plug-in hybrid easement
Newer emissions testing raised the official CO2 figure for many plug-in hybrids. To prevent a sudden jump in their BIK rate, HMRC treats an eligible hybrid registered under the Euro 6e-bis standard or later, with a quoted CO2 figure of at least 51g/km and an electric range of at least 1 mile, as emitting 1g/km [7]. The easement covers cars first registered from 1 January 2025 to 5 April 2028, and a car made available before 5 April 2028 keeps it until the arrangement is varied or renewed, or 5 April 2031 at the latest [7].
How the car percentage becomes a taxable value
The percentage is applied to the car's list price, not to what the employer paid for it [17]. HMRC's booklet 480 sets the inputs that adjust the list price before the percentage is applied.
| Input | Rule |
|---|---|
| List price | Manufacturer's published inclusive price, not the dealer's advertised price |
| Accessories | Added to the list price; later accessories of £100 or less ignored |
| Capital contributions | Deducted, up to £5,000 |
| Unavailability | Reduces the charge only for 30 or more consecutive days |
| Private use payments | Deducted only if made specifically for private use |
Each rule is set out in chapter 12 of HMRC booklet 480 [17], and HMRC's online calculator applies the same steps [25].
Worked examples of cash equivalents
The table shows the full-year cash equivalent for three typical cars in the 2026-27 tax year, before any reductions.
| Car | List price | Appropriate percentage | Cash equivalent |
|---|---|---|---|
| Electric, 0g/km | £50,000 | 4% | £2,000 |
| Plug-in hybrid, 35-mile range | £45,000 | 14% | £6,300 |
| Petrol, 120g/km | £35,000 | 30% | £10,500 |
The percentages come from HMRC's appropriate percentage table [2] and the method from booklet 480 [17].
What the employee and the employer pay
The cash equivalent is added to taxable income, so the extra income tax equals the tax on salary plus the benefit, less the tax on salary alone [16]. The examples below use the Moonworkers calculator engine for an employee in England on code 1257L in the 2026-27 tax year.
| Employee | Car | Extra income tax a year | Employer Class 1A a year |
|---|---|---|---|
| Salary £30,000 | Electric, £2,000 benefit | £400 | £300 |
| Salary £30,000 | Petrol, £10,500 benefit | £2,100 | £1,575 |
| Salary £70,000 | Electric, £2,000 benefit | £800 | £300 |
| Salary £70,000 | Petrol, £10,500 benefit | £4,200 | £1,575 |
On a salary of £30,000, income tax rises from £3,484.20 to £3,884.20 with the electric car, an extra £400, and to £5,584.20 with the petrol car, an extra £2,100 [18]. On a salary of £70,000 the same cars add £800 and £4,200, because the benefit is taxed at 40% [18]. The employer's Class 1A charge depends only on the benefit, at £300 for the electric car and £1,575 for the petrol car, whatever the employee earns [4].
The gap explains why electric cars dominate company fleets. For the employer, the petrol car in these examples costs £1,275 more in Class 1A every year than the electric car. A deeper walk-through of the car calculation sits in the guide to company car tax.
Van, fuel and other fixed BIK charges
Vans and fuel do not use a percentage. They use flat annual charges, uprated each April in line with the Consumer Price Index [3]. The table compares the 2026-27 charges with the previous tax year.
| Charge | 2025-26 tax year | 2026-27 tax year |
|---|---|---|
| Van benefit charge | £4,020 | £4,170 |
| Van fuel benefit charge | £769 | £798 |
| Car fuel benefit multiplier | £28,200 | £29,200 |
Both columns are taken from HMRC's announcement of the 2026-27 van and fuel charges [3].
Vans and van fuel
The van charge applies when a company van is available to an employee for private use [15]. Pool vans shared by employees for business journeys, and vans with only insignificant private use, are exempt, and a zero-emission van is reported at nil [15]. Since 6 April 2025, a double cab pick-up first provided to an employee is treated as a car rather than a van, with transitional protection for vehicles purchased, leased or ordered on or before 5 April 2025 until disposal or 5 April 2029 [8].
Car fuel benefit
Free private fuel for a company car creates a separate charge: the car's appropriate percentage multiplied by the £29,200 fuel multiplier [3] [16]. For the petrol car at 30%, that adds a fuel benefit of £8,760 on top of the car benefit. HMRC's statistics record 40,000 car fuel benefit recipients with an average taxable value of £3,510 [1].
Electricity is not a fuel for car fuel benefit purposes, so charging a company electric car at work creates no fuel benefit [4] [26]. Employers that reimburse business mileage in a company car use HMRC's advisory fuel rates, which change quarterly and include a separate rate for electric cars [19].
Loans, trivial benefits and other thresholds
Several benefits carry a threshold below which no charge arises [9] [14]. The table compares the main ones.
| Benefit | Threshold or rule | Charge above it |
|---|---|---|
| Beneficial loans | Total balance of £10,000 or less throughout the tax year | Interest at the official rate, less interest paid |
| Trivial benefits | £50 or less per benefit, not cash, not a reward | Full cost if any condition fails |
| Trivial benefits, close company directors | £300 a tax year in total | Excess taxable |
| Pool cars and pool vans | Shared, business use only | Full charge if used privately |
The loan threshold comes from HMRC's guidance on loans to employees [9], the trivial benefit rules from its trivial benefit guidance [14], and the pool rules from its company car and van pages [26].
Beneficial loans and the official rate
A loan to an employee at no interest or below HMRC's official rate is a benefit, unless the combined balance stays at or under £10,000 at all times in the tax year [10] [9]. HMRC publishes the average and actual official rates each year, and the cash equivalent is the interest at that rate less any interest the employee pays [11]. Loans made under a salary sacrifice arrangement are not exempt and must be reported [9].
Trivial benefits
A benefit costing £50 or less is exempt if it is not cash or a cash voucher, not a reward for work and not a contractual entitlement [14]. The exemption sits in section 323A of the Income Tax (Earnings and Pensions) Act 2003, and directors of close companies are capped at £300 of trivial benefits in a tax year [28] [14]. The guide to trivial benefits covers the edge cases.
Salary sacrifice and the higher-of rule
When a benefit is provided through salary sacrifice, the taxable value is the higher of the salary given up and the normal BIK value [24]. Cars with CO2 emissions of 75g/km or less are an exception and always use the normal BIK value, which is why electric cars remain efficient through sacrifice schemes [24]. The guide to the salary sacrifice electric car scheme works through the numbers.
BIK rates from 2027-28 to 2029-30
The government has legislated or announced company car percentages several years ahead, so fleet decisions can be priced over the life of a lease [5] [6]. The table summarises the scheduled path.
| Tax year | Zero-emission cars | Hybrids, 1 to 50g/km | Maximum percentage |
|---|---|---|---|
| 2026-27 | 4% | 4% to 16% by range | 37% |
| 2027-28 | 5% | Rising by 1 point | 37% |
| 2028-29 | 7% | 18% | 38% |
| 2029-30 | 9% | 19% | 39% |
The 2027-28 figures come from the policy paper on the appropriate percentage to 2027-28 [5] and the later years from the policy paper for 2028-29 and 2029-30 [6].
What the rises mean for electric and hybrid cars
The zero-emission rate rises by 2 points a year from 2028-29, so it more than doubles from 4% to 9% over three years [6]. Hybrids lose their range-based banding and move to a single 18% band in 2028-29, which brings them closer to conventional cars [6] [7].
What the rises mean for conventional cars
All other bands rise by 1 point a year from 2028-29, and the maximum rises from 37% to 39% by 2029-30 [6]. For employers, the Class 1A cost of an existing petrol or diesel fleet will rise every year without any change to the cars [4] [5].
Reporting and paying BIK
Rates only produce a liability once the benefit is reported. Two routes exist: the end-of-year P11D, and payrolling, where the cash equivalent is taxed through each payslip [21] [20].
P11D deadlines
The table sets out the year-end deadlines, all counted from the end of the tax year.
| Task | Deadline |
|---|---|
| Report expenses and benefits (P11D) | 6 July |
| Give employees a copy of the information | 6 July |
| Report total Class 1A owed (P11D(b)) | 6 July |
| Pay Class 1A electronically | 22 July |
| Pay Class 1A by cheque | 19 July |
The dates are taken from HMRC's expenses and benefits deadlines page [13]. A late P11D(b) attracts a penalty of £100 per 50 employees for each month or part month [13]. The P11D form guide covers each section of the return.
Mandatory payrolling from 6 April 2027
From 6 April 2027 employers must report and pay income tax and Class 1A on company cars, car fuel, vans, van fuel and medical benefits through payroll in real time [12] [23]. Most other benefits follow from 6 April 2028, while loans and accommodation stay voluntary [12]. The guide to mandatory payrolling of benefits sets out the transition in detail.
Payrolling turns BIK rates into a per-payslip calculation. Every change of car, list price or availability date must flow into the next pay run, which is why HMRC-recognised payroll software for SMEs needs the vehicle data held alongside the employee record [20] [30].
Keeping BIK rates current in payroll systems
BIK rates change on a published schedule, but the inputs change constantly: a new car, a different electric range, an employee contribution, a period without the car. Each one changes the cash equivalent [17] [2].
Holding the right vehicle data
A complete vehicle record holds the list price, accessories, capital contributions, CO2 figure, electric range, fuel type, RDE2 status for diesels and registration standard for hybrids [17] [7]. Accountants managing fleets across many clients typically use a payroll bureau platform that validates those fields before the payroll run, rather than at P11D time [21].
Embedding the calculation
Platforms that manage fleets, benefits or HR data can delegate the calculation to an HMRC-recognised payroll API, sending vehicle data and receiving the payrolled benefit and Class 1A figures for each period [20] [23]. The wider mechanics are explained in the guide to benefit in kind tax.
Conclusion
BIK rates are less a single number than a family of rules: a percentage table for cars, flat charges for vans and fuel, thresholds for loans and trivial benefits, and a 15% Class 1A charge layered on top of each. The worked examples show how far apart the outcomes sit: the same employer pays £300 a year in Class 1A on an electric car and £1,575 on a petrol one.
The direction of travel is set. Electric car rates climb towards 9%, hybrids converge on conventional cars, and from 6 April 2027 the main vehicle benefits move into the payroll itself. Employers that treat BIK rates as live payroll data, rather than a once-a-year P11D exercise, will absorb those changes with the least friction.
Frequently asked questions
What is the BIK rate for an electric company car?
A zero-emission company car has an appropriate percentage of 4% for the 2026-27 tax year [2]. The rate rises to 5% in 2027-28, 7% in 2028-29 and 9% in 2029-30 [5] [6]. The percentage is applied to the car's list price to give the taxable benefit.
Do employees pay National Insurance on benefits in kind?
No. Employees pay income tax on the cash equivalent of a benefit, but no National Insurance [16]. The employer pays Class 1A National Insurance at 15% on the same value [4]. Benefits given through salary sacrifice are valued under the higher-of rule, which can change the value on which Class 1A is charged.
How is the BIK rate worked out for a diesel company car?
The diesel car takes the percentage for its CO2 band and adds a 4% supplement, up to the 37% maximum [2]. Diesel cars that meet the RDE2 standard do not pay the supplement [27]. The registration document shows whether a car meets the standard.
When do BIK rates change each year?
Company car percentages, van charges and fuel charges change on 6 April, the start of the tax year [3]. Car percentages are announced several years in advance, while van and fuel charges are uprated each year with the Consumer Price Index [6]. Advisory fuel rates for business mileage are reviewed quarterly instead.
