Car Benefit Charge (Company Car Tax)
UK tax glossary · Last reviewed: April 2026
The company car benefit charge is calculated as the car's P11D value (list price including accessories) multiplied by a percentage that depends on CO₂ emissions and fuel type. Rates range from 2% for zero-emission electric vehicles to 37% for high-emission cars (2026/27).
The resulting taxable benefit is added to your income. A basic-rate taxpayer in a company car with a £25,000 P11D value and 30% BiK rate has a £7,500 benefit, costing £1,500 in income tax (20%). Fuel benefit charges are separate if the employer also pays for private fuel.
Cars provided from April 2020 are subject to revised CO₂ emission rates under WLTP testing, which are generally higher than the old NEDC figures. From April 2025, hybrid vehicles also have revised rates reflecting reduced reliance on electric range.
Worked example
Company car P11D: £35,000. CO₂: 120g/km → BiK rate 30%. Taxable benefit: £10,500. Basic-rate employee's tax: £10,500 × 20% = £2,100/year. Employer's Class 1A NI: £10,500 × 15% = £1,575/year.
Common questions
Does the car benefit charge apply if I drive the company car only for business?
Yes, if the car is available for private use — even if you choose not to use it privately. To avoid the benefit entirely, the car must be unavailable for private use under the terms of your employment, which is rare in practice.
Is it better to take a company car or a car allowance?
It depends on the car's emissions and the allowance amount. Low-emission cars (especially EVs) make company cars attractive due to low BiK rates. High-emission cars make a taxable car allowance and buying privately more cost-effective. Use a whole-of-life cost comparison.
Related resources
TaxHelper provides general information based on published HMRC rates and guidance. It is not regulated financial or tax advice. For decisions involving significant sums, complex circumstances, or if you are unsure, speak to a qualified accountant or HMRC directly.