Electric Vehicles News & Insights

Changes to Company Car Tax on Electric Cars

In April 2025, the Benefit in Kind (BiK) rate for company car tax on electric cars increased from 2% to 3%. This rate will continue to increase annually until at least 2029/30; however, it remains much lower than the BiK rates for internal combustion engine (ICE) and hybrid cars.

What does Benefit in Kind mean?

As an employee, you are required to pay tax on the “Benefit in Kind” of any benefits provided by your employer on top of your salary. For a company car benefit, this is often referred to as company car tax. If your employer provides you with a company car for personal use, including salary sacrifice cars, you will have to pay tax on the use of this benefit.

How is company car tax calculated?

Company car tax is calculated on a range of factors, including:

  • The car’s value (P11D Value) – if you have a more expensive company car, you will pay more tax.
  • Fuel type – electric cars benefit from lower tax rates than petrol or diesel cars.
  • CO2 emissions – lower-emission cars are taxed less than higher-emission cars.
  • Employee income tax band – the tax paid on BiK depends on your personal income tax rate (e.g., 20%, 40%, or 45% in the UK).

To calculate the amount of company car tax you should:

  1. Find the car’s P11D value (see below)
  2. Multiply by the BiK rate based on its CO2   emissions (see: BiK tax tables)
  3. Multiply by the employee’s income tax rate to determine the annual tax amount.
  4. Divide by 12 to find the monthly amount.

P11D Value  x  BiK Rate  x  Income Tax Rate

12

Alternatively, you can use HMRC’s company car and fuel benefit calculator to calculate how much tax you might pay.

What is a P11D?

A P11D is a form completed by employers to notify HMRC of company benefits employees have received. Within this form, the employer will provide the P11D value of the car. The P11D value includes the list price, any factory-fitted options, VAT, and delivery charges. This is the value used when calculating the BiK tax on a company car.

BiK tax tables

The table below displays the BiK company car tax rates for electric, hybrid, petrol and diesel cars up until the 2029/30 tax year.

CO2 (g/km)Electric range (miles)2025/26 (%)2026/27 (%)2027/28 (%)2028/29 (%)2029/30 (%)
0N/A34579
1-50>1303451819
1-5070-1296781819
1-5040-69910111819
1-5030-391314151819
1-50<301516171819
51-54 1617181920
55-59 1718192021
60-64 1819202122
65-69 1920212223
70-74 2021212223
75-79 2121212223
80-84 2222222324
85-89 2323232425
90-94 2424242526
95-99 2525252627
100-104 2626262728
105-109 2727272829
110-114 2828282930
115-119 2929293031
120-124 3030303132
125-129 3131313233
130-134 3232323334
135-139 3333333435
140-144 3434343536
145-149 3535353637
150-154 3636363738
155-159 3737373839
160-164 3737373839
165-169 3737373839
170+ 3737373839

For the latest information on company car tax, visit: Gov UK: Tax on company cars

Company car tax examples

Example 1: Petrol Kia Sportage 3 Example 2: MHEV Kia Niro 4 Mild Hybrid Example 3: PHEV Kia Niro 4 PHEV Example 4: Electric Kia Niro 4 Electric
P11D Value: £33,670 CO2/BiK rate: 149 (35%)P11D Value: £35,290 CO2/BiK rate: 106 (27%)P11D Value: £40,435 CO2/BiK rate: 22 (13%) P11D Value: £42,930 CO2/BiK rate: 0 (3%)
20%
£33,670 x 35% x 20% = £2,356.90 (£196.41 per month)£35,290 x 27% x 20% = £1,905.66 (£158.81 per month)£40,435 x 13% x 20% = £1,051.31 (£87.61 per month)£42,930 x 3% x 20% = £257.58 (£21.57 per month)
40%
£33,670 x 35% x 20% = £4,713.80 (£392.82 per month)£35,290 x 27% x 40% = £3,811.32 (£317.61 per month)£40,435 x 13% x 40% = £2,102.62 (£175.22 per month)£42,930 x 3% x 20% = £515.16 (£42.93 per month)

Salary sacrifice BiK rules

If your employer offers a salary sacrifice scheme, you could drive a brand new, low-emission car paid for through your pre-tax salary. This means you can make substantial savings on National Insurance and income tax. However, since salary sacrifice is a company benefit, you will still need to pay tax on the value of the benefit. Therefore, the guidance mentioned above still applies. Due to the high BiK rates for ICE cars, salary sacrifice is generally only financially advantageous for those who choose zero or very low-emission cars.

Choosing your company car

When considering company car options, check the CO2 emissions and use the table above to compare the BiK rates. If you’re looking to save money on company car tax, an electric car might be the best choice for you and your company. As mentioned, BiK rates remain significantly lower for electric cars than petrol, diesel, and hybrid, meaning EV drivers can enjoy significant savings. Not to mention, many popular ICE models are now widely available as PHEV or fully electric versions. As shown in the examples above, a company car driver on the 40% tax band can save around £275 a month by opting for an electric version of the same car (Kia Niro 4 EV vs. MHEV).

The BiK rate for electric cars will increase annually, reaching 9% in 2029/30. However, BiK rates will increase across the board, with cars emitting over 154g/km of CO2 facing a rate of 39%.