Company car tax calculator and benefit in kind rates for 2026/27

Updated for the 2026/27 tax year · Checked 13 November 2026 By the Rodway Labs editorial team · Editorial policy

Updated 13 November 2026 · Tax year 2026/27

Scope: income tax on a company car made available for private use, 2026/27. The Take-Home Lab calculator does not include benefits in kind.

A company car is not free. If your employer lets you use one privately, HMRC treats it as part of your pay: a benefit in kind. You pay income tax on a cash value worked out from the car's list price and its CO2 emissions, even though no money reaches your bank account. That tax comes out of your salary, so your take-home falls.

This guide explains how the benefit is valued for the 2026/27 tax year, works through examples with the js/tax.js engine behind the Take-Home Lab calculator, and shows how the tax is collected. Figures are for England, Wales and Northern Ireland unless stated. It is an illustration only, not tax advice.

How the benefit is worked out

The taxable value of a company car is:

list price (including options and accessories) × appropriate percentage

The list price is the price of the car when new, not what your employer paid for it. The appropriate percentage depends on the car's CO2 emissions and, for plug-in hybrids, its electric-only range. The result is added to your taxable income and taxed at your marginal income tax rate. Employees do not pay National Insurance on it; the employer pays Class 1A National Insurance at 15% instead.

If your employer also pays for fuel for private journeys, there is a separate car fuel benefit, covered below. This guide is part of our benefits in kind guide.

What counts as the list price (the "P11D value")

The starting figure is often called the car's P11D value, after the form employers use to report it. It is the manufacturer's published retail price for the car on the day before it was first registered, and it includes:

• VAT and delivery charges
• standard accessories fitted as part of the model
• optional extras and accessories added when the car was supplied, or later if they cost more than £100, and that are attached to the car

It does not include the first registration fee, and it is not the price your employer actually paid. A dealer discount or a cheap lease deal does not reduce your tax. If there is no published list price, a notional price is used instead.

What reduces the benefit

• Capital contributions. If you pay towards the cost of the car or its accessories, the amount is deducted from the list price, up to a maximum of £5,000. The deduction continues every year you have the car.
• Payments for private use. If you must pay your employer for the private use of the car as a condition of having it, and you do, those payments are deducted from the benefit, pound for pound, and can reduce it to nil. Paying for fuel or insurance does not count as a payment for private use.
• Time without the car. The benefit is reduced for days before you first had the car, after you hand it back, and for any continuous spell of 30 days or more when it was not available to you. A shorter gap does not count.
• Sharing. If a car is available to several employees for private use at the same time, each person's charge is reduced on a just and reasonable basis.

Pool cars that are shared by employees for work, normally kept at your employer's premises and not used privately, are not taxable at all.

Appropriate percentages for 2026/27

For zero-emission and low-emission cars, the percentages rise by 1 point in 2026/27. The main rates on HMRC's table are:

Scroll sideways to see the whole table →

Between those rows the percentage mostly rises by 1 point for each 5 g/km. Diesel cars that do not meet the RDE2 standard pay a 4% supplement, still capped at 37%. Check HMRC's full table for your car's exact figure.

Worked example: a £40,000 electric car

Assumptions: 2026/27 · England, Wales or Northern Ireland · £35,000 salary · standard £12,570 allowance · car available all year · no contribution from you · no fuel benefit.

• Benefit in kind: £40,000 × 4% = £1,600
• Extra income tax at 20%: £320.00 a year (£26.67 a month)
• On a £60,000 salary, at 40%: £640.00 a year (£53.33 a month)
• In Scotland on £35,000, at the 21% intermediate rate: £336.00 a year

Low rates for electric cars are why many employers offer them, often through salary sacrifice. The 4% rate for 2026/27 rises to 5% in 2027/28.

Worked example: a petrol car at 120 g/km

• List price £30,000 × 30% = £9,000 benefit
• On £35,000: extra tax £1,800.00 a year (£150.00 a month)
• On £48,000: the benefit pushes £6,730 of income above the £50,270 higher-rate threshold, so the extra tax is £454.00 at 20% plus £2,692.00 at 40% = £3,146.00 (£262.17 a month)

The benefit counts as income for working out your tax band, even though you never receive it as cash. It can push you into the higher rate, or, if your income is close to £100,000, into the personal allowance taper. On a £97,000 salary, a £9,000 benefit adds £4,800.00 of tax: £3,000 at 40% and £6,000 at an effective 60%.

Worked example: a plug-in hybrid

A plug-in hybrid with 1 to 50 g/km and a 40 to 69 mile electric range is at 10% in 2026/27. On a £45,000 list price, the benefit is £4,500. That costs £900.00 a year at basic rate and £1,800.00 at higher rate. A hybrid with a longer electric range costs far less: at 130 miles or more it would be 4%, or £1,800 of benefit.

Free fuel

If your employer pays for fuel you use privately, a fuel benefit is added on top. It is the car's appropriate percentage × the car fuel benefit multiplier, which is £29,200 for 2026/27. For the 30% petrol car above, that is £8,760 of extra benefit, or £1,752.00 of tax at basic rate. The charge does not depend on how much fuel you use, so it often costs more than paying for private fuel yourself. There is no fuel benefit for electricity used to charge a fully electric car.

• Making good: the fuel benefit is removed only if you pay your employer back for all the fuel used for private journeys, including commuting, by 6 July after the end of the tax year. Repaying part of it does not reduce the charge.
• Stopping free fuel: if your employer stops providing private fuel part way through the year and does not start again that year, the charge is reduced for the rest of the year.
• Capital contributions and payments for private use do not reduce the fuel benefit. Even if they reduce the car benefit to nil, the fuel benefit still applies.

Scroll sideways to see the whole table →

A higher-rate taxpayer in a 37% car pays £4,321.60 a year for free fuel. That buys a lot of fuel at the pump, so free fuel only pays off for people with high private mileage.

Worked example: capital contribution and a diesel supplement

Assumptions: 2026/27 · England, Wales or Northern Ireland · car available all year · no fuel benefit.

You choose a £45,000 petrol car at 120 g/km (30%) and pay a £5,000 capital contribution and £1,200 a year for private use.

• List price less capital contribution: £45,000 − £5,000 = £40,000
• × 30% = £12,000, less £1,200 paid for private use = £10,800 benefit
• Tax at 20% (on a £35,000 salary): £2,160.00; at 40% (on £60,000): £4,320.00
• Without the contribution and payments, the benefit would be £13,500: £2,700.00 at 20% or £5,400.00 at 40%

A diesel car that does not meet the RDE2 emissions standard pays 4 percentage points more. A £30,000 diesel at 120 g/km is therefore at 34%, a £10,200 benefit: £2,040.00 at 20% or £4,080.00 at 40%. A diesel that meets RDE2 uses the same percentage as petrol.

Scotland

If you pay Scottish income tax, the benefit is taxed at your Scottish marginal rate. A £1,600 electric car benefit costs £336.00 a year on a £35,000 salary (21% intermediate rate) and £672.00 on £60,000 (42% higher rate). Bigger benefits can push income from one Scottish band into the next, just as they can cross the £50,270 threshold elsewhere in the UK.

Salary sacrifice and car allowances

If you get a car through salary sacrifice, or choose a car instead of a cash car allowance, the optional remuneration rules may apply: you are taxed on the higher of the cash given up and the normal car benefit. Cars with CO2 emissions of 75 g/km or less, including all electric cars, are always taxed on the normal car benefit, which is why electric car salary sacrifice schemes save tax.

How the tax is collected

There are two ways the tax reaches HMRC:

• Through your tax code. HMRC reduces your personal allowance by the benefit. A £1,600 benefit turns 1257L into 1097L; a £9,000 benefit turns it into 357L. Your employer then takes the extra tax each payday. If HMRC does not know about a new car, or the figure is wrong, you can end up with a tax bill or refund after the year ends.
• Payrolling. Your employer adds the value of the benefit to your taxable pay each pay period and deducts tax as if it were salary. Your tax code is not reduced. Payrolling is currently voluntary. HMRC plans to make it mandatory for company cars, car fuel, vans, van fuel and medical benefits from 6 April 2027.

Your payslip or your tax code notice from HMRC will show which method is used. Either way, the total tax for the year is the same.

What the calculator does and does not model

The take-home calculator does not have a benefit-in-kind input. Its results assume no taxable benefits and a standard 1257L tax code, so if you have a company car your payslip will show less take-home than the calculator. To estimate the difference, work out the benefit as above and multiply it by your marginal income tax rate. Do not add the benefit to your salary in the calculator, because that would also charge employee NI and student loan on it, which do not apply to a company car benefit.

Check your salary in the calculator

Sources (checked 13 November 2026): HMRC work out the appropriate percentage for company car benefits (480: Appendix 2); HMRC EIM24705 ready reckoner; GOV.UK travel, mileage and fuel rates (car fuel benefit multiplier); HMRC rates and thresholds for employers 2026 to 2027 (Class 1A 15%); HMRC mandatory reporting of benefits in kind from April 2027; GOV.UK tax on company benefits; HMRC 480 chapter 12: how to work out the benefit of a company car (list price, accessories, capital contributions, private use payments, unavailability); HMRC 480 chapter 13: taxable fuel (making good by 6 July); HMRC salary sacrifice for employers. Figures from the Take-Home Lab calculator engine for 2026/27. Illustrative only — not tax advice. Rodway Labs · hello@takehomelab.co.uk.