This page explains the detailed calculation behind UK company car tax, including P11D value, Benefit-in-Kind (BIK), CO2-based taxable percentages, electric range, fuel benefit and employer National Insurance.
If you only want to estimate tax for a selected vehicle, use the calculator. If you want a simpler explanation of the main terms, use the general company car tax explanation page.
Company Car Tax Calculation Summary
The usual calculation follows five stages:
- Determine the car's P11D value.
- Find the appropriate taxable percentage.
- Multiply the P11D value by the taxable percentage to calculate the annual Benefit-in-Kind.
- Apply the employee's tax rate to calculate the employee's company car tax.
- Apply employer Class 1A National Insurance where relevant.
Important: Company car tax rules can change between tax years. Calculations should be checked for the relevant tax year and personal tax position.
The Core Formula
The basic company car benefit formula is:
P11D Value × Appropriate Percentage = Annual Company Car Benefit
The employee's tax is then calculated by applying the employee's tax rate to the annual company car benefit:
Annual Company Car Benefit × Employee Tax Rate = Company Car Tax
For example, if a car has a P11D value of £40,000 and an appropriate percentage of 25%, the annual company car benefit is £10,000. If the employee pays tax at 40%, the annual tax would be £4,000.
Step 1: Determine The P11D Value
The P11D value is the taxable value of the company car used in the Benefit-in-Kind calculation. It is not usually the discounted price paid by the employer, leasing company or dealer.
The P11D value is normally based on the manufacturer's list price, plus delivery charges and certain accessories. VAT is included where relevant.
What Is Usually Included?
- The basic list price of the car.
- Factory-fitted options and accessories.
- Some accessories fitted after delivery where the cost exceeds the relevant threshold.
- Delivery charges.
- VAT on the relevant amounts.
What Is Usually Excluded?
- Vehicle Excise Duty.
- The first registration fee.
- Delivery fuel.
- Certain adaptations for disabled drivers.
- Some post-delivery gas conversion equipment where no recognised gas-based CO2 output exists.
Step 2: Find The Appropriate Percentage
The appropriate percentage is the percentage applied to the P11D value to calculate the annual Benefit-in-Kind.
For most modern company cars, the appropriate percentage is based on:
- CO2 emissions;
- fuel type;
- electric-only range for some low-emission hybrid vehicles;
- the relevant tax year; and
- diesel supplement rules where applicable.
Fully electric cars have zero tailpipe CO2 emissions and are therefore usually subject to a lower appropriate percentage than petrol, diesel or hybrid cars.
The table below shows the appropriate percentages used to calculate company car Benefit-in-Kind (BIK) from the 2026/27 tax year onwards.
These percentages are applied to the vehicle's P11D value to calculate the annual company car benefit.
| 0 |
N/A |
4% |
5% |
7% |
9% |
| 1-50 |
≥130 |
4% |
5% |
7% |
9% |
| 1-50 |
70-129 |
7% |
8% |
10% |
12% |
| 1-50 |
40-69 |
10% |
11% |
13% |
15% |
| 1-50 |
30-39 |
14% |
15% |
17% |
19% |
| 1-50 |
<30 |
16% |
17% |
19% |
21% |
| 51-54 |
N/A |
17% |
18% |
20% |
22% |
| 55-59 |
N/A |
18% |
19% |
21% |
23% |
| 60-64 |
N/A |
19% |
20% |
22% |
24% |
| 65-69 |
N/A |
20% |
21% |
23% |
25% |
| 70-74 |
N/A |
21% |
21% |
23% |
25% |
| 75-79 |
N/A |
21% |
21% |
23% |
25% |
| 80-84 |
N/A |
22% |
22% |
24% |
26% |
| 85-89 |
N/A |
23% |
23% |
25% |
27% |
| 90-94 |
N/A |
24% |
24% |
26% |
28% |
| 95-99 |
N/A |
25% |
25% |
27% |
29% |
| 100-104 |
N/A |
26% |
26% |
28% |
30% |
| 105-109 |
N/A |
27% |
27% |
29% |
31% |
| 110-114 |
N/A |
28% |
28% |
30% |
32% |
| 115-119 |
N/A |
29% |
29% |
31% |
33% |
| 120-124 |
N/A |
30% |
30% |
32% |
34% |
| 125-129 |
N/A |
31% |
31% |
33% |
35% |
| 130-134 |
N/A |
32% |
32% |
34% |
36% |
| 135-139 |
N/A |
33% |
33% |
35% |
37% |
| 140-144 |
N/A |
34% |
34% |
36% |
38% |
| 145-149 |
N/A |
35% |
35% |
37% |
39% |
| 150-154 |
N/A |
36% |
36% |
38% |
39% |
| 155-159 |
N/A |
37% |
37% |
39% |
39% |
| 160-164 |
N/A |
37% |
37% |
39% |
39% |
| 165-169 |
N/A |
37% |
37% |
39% |
39% |
| 170+ |
N/A |
37% |
37% |
39% |
39% |
Please note: The percentages shown above apply to cars first registered from 6 April 2020. Different rules may apply to older vehicles, certain diesel vehicles and some special cases.
Step 3: Calculate The Annual Benefit-in-Kind
Once the P11D value and appropriate percentage have been identified, the annual company car benefit is calculated by multiplying them together.
Example:
- P11D value: £40,000
- Appropriate percentage: 25%
- Annual Benefit-in-Kind: £10,000
This Benefit-in-Kind amount is the taxable benefit. It is not the same as the tax actually paid by the employee.
Step 4: Apply The Employee's Tax Rate
The employee pays income tax on the annual Benefit-in-Kind according to their own tax rate.
For example, if the annual Benefit-in-Kind is £10,000:
- At 20%, the annual tax would be £2,000.
- At 40%, the annual tax would be £4,000.
- At 45%, the annual tax would be £4,500.
Scottish taxpayers may pay tax using Scottish rates and bands, which can produce different results.
Step 5: Calculate Employer National Insurance
Employers normally pay Class 1A National Insurance Contributions on taxable company car benefits and fuel benefits.
This is an employer cost and is separate from the employee's income tax charge.
Employer NIC Formula: Annual Benefit-in-Kind × Class 1A NIC Rate = Employer NIC
Company Car Fuel Benefit
Company car fuel benefit can apply where an employer provides fuel for private journeys.
The fuel benefit is calculated separately from the car benefit. The car's appropriate percentage is applied to the annual car fuel benefit multiplier.
Fuel Benefit Formula: Fuel Benefit Multiplier × Appropriate Percentage = Annual Fuel Benefit
For the 2026/27 tax year, the car fuel benefit multiplier is £29,200.
Example:
- Fuel benefit multiplier: £29,200
- Appropriate percentage: 25%
- Annual fuel benefit: £7,300
The employee then pays tax on the fuel benefit according to their tax rate. The employer may also pay Class 1A National Insurance on the fuel benefit.
Diesel Supplement
Some diesel company cars may be subject to an additional diesel supplement when calculating the appropriate percentage.
The diesel supplement does not apply to every diesel car. Cars meeting the relevant Real Driving Emissions Step 2 standard may be treated differently.
Where the diesel supplement applies, the result is normally capped at the maximum percentage for the relevant tax year.
Electric Company Cars
Electric company cars have zero tailpipe CO2 emissions. This normally gives them a lower appropriate percentage than petrol, diesel or many hybrid company cars.
Electric company cars can still create a taxable benefit. The calculation still uses the P11D value and the appropriate percentage for the relevant tax year.
Options and accessories can increase the P11D value of an electric company car, even though they do not affect tailpipe CO2 emissions.
Plug-in Hybrid Company Cars
Plug-in hybrid company cars are affected by both CO2 emissions and electric-only range.
A plug-in hybrid with a longer official electric-only range may have a lower appropriate percentage than a similar car with a shorter electric range.
Hybrid calculations should be treated carefully because CO2 testing and company car tax rules can change over time.
Capital Contributions
A capital contribution is an amount paid by the employee towards the cost of the company car.
Where the contribution qualifies, it can reduce the taxable value used in the company car benefit calculation, subject to limits.
Example:
- Original P11D value: £40,000
- Qualifying capital contribution: £1,000
- Adjusted value for benefit calculation: £39,000
Capital contributions are technical and should be checked carefully, particularly where options, upgrades or salary sacrifice arrangements are involved.
Private Use Contributions
A private use contribution is an amount the employee is required to pay as a condition of the company car being available for private use.
Where it qualifies, it can reduce the annual taxable benefit.
Example:
- Annual company car benefit before contribution: £8,000
- Private use contribution: £600
- Adjusted annual benefit: £7,400
A private use contribution cannot create a negative taxable benefit.
Availability Adjustments
Company car benefit can be reduced where the car is unavailable for private use for a qualifying period.
Periods before the car first becomes available and after it ceases to be available are normally excluded from the benefit calculation.
Temporary unavailability may also be relevant where the car is unavailable for 30 consecutive days or more.
Example:
- Annual company car benefit before adjustment: £8,000
- Car unavailable for 31 days
- Availability adjustment: £8,000 ÷ 365 × 31 = £679
- Adjusted annual benefit: £7,321
Factors That Influence Company Car Tax
Company car tax is affected by several factors:
| Factor |
Effect |
| P11D value |
A higher P11D value generally increases the annual company car benefit. |
| CO2 emissions |
Higher CO2 emissions normally increase the appropriate percentage. |
| Electric-only range |
For some plug-in hybrids, longer electric range may reduce the appropriate percentage. |
| Fuel type |
Diesel rules and electric vehicle rules can affect the calculation. |
| Accessories and options |
Factory options can increase the P11D value. |
| Employee tax rate |
The Benefit-in-Kind is taxed according to the employee's tax position. |
| Fuel benefit |
Employer-provided private fuel can create an additional taxable benefit. |
Technical Calculation Example
Assume:
- P11D value: £40,000
- Appropriate percentage: 25%
- Employee tax rate: 40%
- Employer Class 1A NIC rate: 15%
The annual company car benefit is:
The employee's annual company car tax is:
The employer's Class 1A National Insurance cost is:
Using DriveSmart Calculators
DriveSmart uses structured vehicle data to estimate company car benefit and tax for selected cars.
The calculator uses the standard vehicle data available for the selected derivative. If a car includes factory options or accessories, the P11D value may be higher than the standard vehicle shown.
Related Company Car Tools
Company Car Tax Calculation FAQs
What is the company car tax formula?
The usual formula is P11D value multiplied by the appropriate percentage to calculate the annual Benefit-in-Kind. The employee then pays income tax on that benefit.
What is the appropriate percentage?
The appropriate percentage is the percentage applied to the P11D value. It is usually based on CO2 emissions, fuel type, electric-only range where relevant and the tax year.
Does the company car tax calculation use the discounted price?
Usually no. The calculation normally uses the P11D value rather than the discounted price actually paid by the employer or leasing company.
How is fuel benefit calculated?
Fuel benefit is calculated by multiplying the annual car fuel benefit multiplier by the car's appropriate percentage.
Can private use contributions reduce the benefit?
A qualifying private use contribution may reduce the annual taxable benefit, but it cannot create a negative benefit.