Company car tax is Income Tax on the benefit in kind of having a company car you can use privately, including for commuting. The taxable value is the car's list price (plus taxable accessories) multiplied by an 'appropriate percentage' set by its CO2 emissions, and you pay your normal Income Tax rate on that value. For 2026 to 2027 the percentage runs from 4 for a zero-emission car (4 in every 100 of the list price is taxed) up to a cap of 37% for the most polluting ones, as of October 2026.
If your employer gives you a car and lets you use it for personal journeys, HMRC treats that as part of your pay. The tax usually comes out through your tax code, so many drivers never see a bill, but the amount can change a lot depending on which car you pick. Here's how the calculation works, with the official rates.
The company car tax formula
- Start with the car's list price when new, plus any taxable accessories. This is what HMRC uses, not what your employer paid.
- Find the appropriate percentage for the car's CO2 emissions (and, for plug-in hybrids, its electric range) in HMRC's tables for the tax year.
- Multiply the list price by the appropriate percentage. That's the cash equivalent, or taxable benefit.
- Reduce it if you only had the car for part of the year, or if you pay something towards it as a condition of private use.
- Apply your Income Tax rate (basic, higher or additional) to the taxable benefit. That's the tax you pay for the year.
GOV.UK says the value is reduced if you have the car part-time, you pay something towards its cost, or it has low CO2 emissions. HMRC publishes a company car and fuel benefit calculator if you want to test different cars.
Appropriate percentages for 2026 to 2027
These are a selection of the WLTP figures from HMRC's ready reckoner for petrol-powered and hybrid-powered cars in the 2026 to 2027 tax year. The figures are the appropriate percentage applied to the list price.
| CO2 emissions (g/km) | Electric range (miles) | Appropriate percentage |
|---|---|---|
| 0 | Not applicable | 4 |
| 1 to 50 | 130 and above | 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 | Less than 30 | 16 |
| 51 to 54 | Not applicable | 17 |
| 75 to 79 | Not applicable | 21 |
| 100 to 104 | Not applicable | 26 |
| 125 to 129 | Not applicable | 31 |
| 155 and above | Not applicable | 37 |
Electric car rates and the published future rates
Electric cars still carry the lowest company car tax by a distance, but the gap is closing on a published timetable. HMRC confirmed in 2022 that zero and ultra-low emission cars would rise by 1 point a year, with zero-emission cars reaching a maximum of 5% in 2027 to 2028. Cars under 75g/km are capped at 21% for 2026 to 2027 and 2027 to 2028, and rates for 75g/km and above are frozen until 5 April 2028, up to the 37% cap.
After that, Autumn Budget 2024 set the next steps: the appropriate percentage for zero-emission cars rises by 2 points a year in 2028 to 2029 and again in 2029 to 2030. Cars with emissions of 1g to 50g/km move to 18% and then 19%, and the maximum rises to 38% and then 39%. If you're choosing a car on a three or four year lease, it's worth checking the rate for every year you'll have it, not just this one.
The plug-in hybrid catch most drivers miss
GOV.UK says a plug-in hybrid's value can be based on CO2 emissions of 1g/km, rather than the figure on its registration certificate, if all of these apply: it was registered from 1 January 2025 to 5 April 2028, it shows 51g/km or more on the certificate, it has an electric range of at least 1 mile, and the certificate doesn't show Euro 6d-ISC-FCM or Euro 6e in the Euro status section. Ask your employer for the car's electric range, because it decides which band you fall into.
Fuel benefit: the second charge
If your employer pays for fuel for your personal journeys, you'll pay tax on that separately. The car fuel benefit is worked out by applying the same appropriate percentage to a fixed multiplier, which is £29,200 for 2026 to 2027, up from £28,200 for 2025 to 2026, as of October 2026. Because the multiplier is the same whatever car you drive, free private fuel on a high-emission car can cost more in tax than the fuel is worth to you. Business mileage is a different matter, covered in this guide to HMRC mileage allowance.
What employers report: P11D and Class 1A
Employers who don't payroll benefits must file a P11D for each employee who had a taxable benefit, plus a P11D(b) for the Class 1A National Insurance they owe. GOV.UK sets the deadline for submitting P11D and P11D(b) forms at 6 July, and Class 1A payment is due by 22 July (19 July if paying by cheque). Employers with fewer than 500 employees can file through HMRC's PAYE Online service. There's more on the form in this P11D guide.
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Salary sacrifice cars
Under salary sacrifice, an employee gives up some salary in return for a car. For a new arrangement, HMRC values the benefit at the higher of the salary given up or the normal benefit in kind charge. The exception that matters: for cars with CO2 emissions of no more than 75g/km, you always use the normal benefit in kind charge. That's why salary sacrifice schemes are so heavily weighted towards electric cars.
My verdict
If you're offered a company car, look at three numbers before you choose: the list price, the appropriate percentage for every year you'll drive it, and whether private fuel is included. For most people, a low-emission car with no free fuel keeps the tax smallest. Tell HMRC through its online service when you get or give back a car, so your tax code is updated and you don't end up with a surprise bill. For your own figures, use HMRC's calculator or ask your payroll team or an accountant.
Frequently asked questions
How is company car tax calculated?
Multiply the car's list price, plus taxable accessories, by the appropriate percentage for its CO2 emissions to get the taxable benefit, then apply your Income Tax rate to that figure.
What is the company car tax rate for an electric car?
HMRC's ready reckoner sets the appropriate percentage for a zero-emission car at 4 for 2026 to 2027 (4 in every 100 of the list price), with a maximum of 5% for 2027 to 2028, then rises of 2 points a year in 2028 to 2029 and 2029 to 2030.
Do I pay tax on fuel from my employer?
Yes, if your employer pays for fuel for personal journeys. The fuel benefit is the car's appropriate percentage applied to a multiplier of £29,200 for 2026 to 2027.
When is the P11D deadline?
Employers must submit P11D and P11D(b) forms by 6 July after the end of the tax year, and pay Class 1A National Insurance by 22 July, or 19 July if paying by cheque.
Is a salary sacrifice electric car taxed differently?
For cars with CO2 emissions of no more than 75g/km, HMRC always uses the normal benefit in kind charge, rather than the higher of that charge or the salary given up.
