Company Car Tax Calculator, 2026/27

How this is calculated

The taxable benefit in kind on a company car is the car's list price, including most factory-fitted options and delivery, multiplied by an appropriate percentage that depends on CO2 emissions and, for the lowest band, electric-only driving range. Zero-emission cars attract the lowest percentage, while higher-emission petrol and diesel cars are taxed towards the maximum.

That taxable benefit is added to your other income and taxed at your marginal rate of income tax, whether basic, higher or additional rate, since it is treated as if it were extra salary for tax purposes even though no cash changes hands.

Separately, the company pays employer Class 1A National Insurance on the same benefit value at the standard employer NI rate, reported annually on form P11D(b) rather than monthly through payroll, which is a real cash cost to the business on top of the car itself.

Why electric cars are usually cheaper

The appropriate percentage for zero-emission cars has been held deliberately low to encourage adoption, making a company electric car dramatically cheaper in personal and employer tax terms than an equivalent petrol or diesel model, even at a similar list price.

This gap has made providing an electric company car one of the more tax-efficient benefits a director can extract from a limited company, particularly compared with taking the same value as salary or dividend, since salary attracts income tax and both employee and employer NIC, and dividends do not reduce corporation tax at all.

Practical points for directors

The benefit is time-apportioned if the car is only available for part of the tax year, and reduced by any capital contribution the employee makes towards the cost, up to a set maximum, or by payments made specifically for private use of the car.

A separate, often more expensive, fuel benefit charge applies if the company pays for private fuel and it is not fully reimbursed, calculated by applying the same appropriate percentage to a fixed fuel benefit multiplier rather than the car's list price.

Is an electric company car worth it for a director?

Often yes. The low appropriate percentage for zero-emission cars means the personal tax and employer NIC cost is usually far lower than the equivalent petrol or diesel car, and lower than the tax cost of extracting the same value as salary.

Does the company car benefit reduce corporation tax?

The company generally gets capital allowances on the cost of the car and can deduct running costs, but the benefit in kind itself is a personal tax charge on the employee, separate from the company's own relief.

What if I pay for some private fuel myself?

If you reimburse the company in full for private fuel, no separate fuel benefit charge arises. Partial reimbursement below the full private fuel cost does not reduce the fuel benefit charge, which is all or nothing.

Does a company van get taxed the same way?

No, vans use a separate flat-rate benefit charge rather than a percentage of list price, and it is reduced to nil for zero-emission vans under current rules, making an electric van usually the cheapest company vehicle option.