# Company car tax and BiK explained

> How company car benefit in kind works for 2026/27: the CO2 and electric-range percentages, the diesel supplement, and why a van is taxed differently.

Source: https://fleetme.co.uk/guides/company-car-tax-bik-explained

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# Company car tax and BiK explained

By [the FleetMe team](https://fleetme.co.uk/about) · Updated 14 October 2026 · 12 min read

The short answer

**Company car tax is the car’s P11D value multiplied by an appropriate percentage set by CO2 emissions, then by your income tax rate. For 2026/27 that percentage runs from 4% for an electric car to a maximum of 37%.**

## How is company car tax actually calculated?

## What decides the appropriate percentage?

## What are the 2026/27 appropriate percentages?

| CO2 (g/km) | Electric-only range | Appropriate percentage |
| --- | --- | --- |
| 0 (battery electric) | — | **4%** |
| 1–50 | 130 miles or more | 4% |
| 1–50 | 70–129 miles | 7% |
| 1–50 | 40–69 miles | 10% |
| 1–50 | 30–39 miles | 14% |
| 1–50 | Under 30 miles | 16% |
| 51–54 | — | 17% |
| 55–59 | — | 18% |
| 95–99 | — | 25% |
| 130–134 | — | 32% |
| 145–149 | — | 35% |
| 165 and above | — | **37% (the cap)** |

## Where do those figures come from, and what is missing?

## Why is an electric company car taxed so much less than a diesel?

## How is a company van taxed differently from a company car?

## Is a double cab pick-up a van or a car for benefit in kind?

## What does providing fuel for private use actually cost?

## How should benefit in kind change a leasing decision?

## This is general information, not tax advice

## Put a price on it

Tell us the vehicle, the term and the annual mileage you need and we come back with a written quote, and we aim to do that the same working day. Rentals are quoted ex VAT with the VAT-inclusive figure alongside, and your agreement is with FleetMe.

How many vehicles do you need?

Takes a minute. No obligation.

## Enquiry received, one step to go.

We can put a guide figure together from what you ve told us. To confirm the vehicle, the monthly rental and a delivery date **in writing**, we need your business details and the underwriting information.

Next step · about 5 minutes

Complete your business application

It s pre-filled from your answers. Nothing is committed until we confirm your quote and you sign.

No obligation · About 5 minutes

Prefer to leave it there? We ll still be in touch about your enquiry.

## FAQs

### How is company car benefit in kind calculated?

Multiply the car’s P11D value by the appropriate percentage for its CO2 emissions, which gives the cash equivalent. The employee pays income tax on that at their marginal rate, and the employer pays Class 1A National Insurance on the same figure — 15% for 2026/27.

### What is the company car tax rate for an electric car in 2026/27?

4%. It rises to 5% in 2027/28, then by two percentage points a year to 7% in 2028/29 and 9% in 2029/30 (gov.uk). The maximum appropriate percentage for 2026/27 is 37%, rising to 38% and then 39% over the same period.

### How does the diesel supplement work?

A diesel car that does not meet the RDE2 emissions standard carries a supplement of 4 percentage points on top of its normal appropriate percentage, subject to the same 37% cap for 2026/27. Diesels that do meet RDE2 are not subject to it (HMRC EIM24705).

### Why is a company van taxed less than a company car?

Because vans use a flat charge rather than a percentage of list price. For 2026/27 it is £4,170 regardless of what the van cost, plus £798 if private fuel is provided. A fully electric van carries a nil charge, and there is no charge at all where private use is insignificant or limited to ordinary commuting.

### Does a company van used only for work create a tax charge?

No. There is no van benefit charge where private use is insignificant, HMRC’s examples include an occasional trip to the tip, or where the terms on which the van is made available restrict private use to ordinary commuting (HMRC EIM22745 and EIM22800). Keep the policy in writing.

### Is a double cab pick-up taxed as a car or a van?

As a car for benefit in kind, generally, from 6 April 2025 for income tax and 1 April 2025 for corporation tax where payload is one tonne or more, with transitional treatment to no later than 5 April 2029 for earlier orders. The VAT definition was not changed by that measure.

### Is free private fuel in a company car worth having?

Rarely. The charge is a fixed multiplier, £29,200 for 2026/27, times the car’s appropriate percentage, so a 32% car produces a £9,344 cash equivalent whether the driver does 500 private miles or 15,000. Reimbursing business mileage at advisory fuel rates is usually cheaper for everyone.

## Next step

Business van leasing →

How the monthly rental is built, what is included, and who business contract hire is for.

Business van leasing eligibility →

The honest answer on who gets considered, and what we look at when we assess a business.

Or go straight to the range: [browse vans and pickups](https://fleetme.co.uk/vans) · [company cars](https://fleetme.co.uk/cars)

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