How the benefit-in-kind charge works
Three numbers drive company car tax:
- P11D value — the car’s list price plus options
- Appropriate percentage — set by CO2 emissions, from 3% (electric) up to 37%
- Your income tax rate — 20%, 40% or 45%
Multiply them for your annual tax. The company separately pays Class 1A National Insurance at 15% on the benefit value. A fuel benefit applies too if the company pays for private fuel — often not worth it.
Why electric cars change the calculation
The zero-emission percentage is deliberately tiny: 3% for 2025/26, 4% for 2026/27, 5% for 2027/28. On a £40,000 EV that’s a taxable benefit of roughly £1,200–£2,000 — a fraction of an equivalent petrol car at 30%+. Add the 100% first-year capital allowance on a new electric car, and the company gets full Corporation Tax relief in year one too.
The alternative: personal car + mileage
For petrol and diesel, the usually-better route is to own the car personally and charge the company HMRC’s approved mileage rate — 45p per business mile for the first 10,000 miles, 25p thereafter — tax-free, with no benefit-in-kind at all. High-emission company cars rarely beat this. The rule of thumb: EV → company car; petrol/diesel → personal car + mileage.
Run the numbers before you buy
The right answer genuinely depends on the specific car, your mileage and your tax band. Before committing the company to any vehicle, it’s worth a five-minute calculation. Call 0114 327 1480 and we’ll compare the options for your situation.