Worked Examples
Example: Company Car Benefit in Kind Calculation
A side-by-side BiK calculation for a £45,000 petrol car and a £45,000 electric car, showing the dramatic difference in employee income tax and employer Class 1A NI in 2025/26.
Quick answers
How is company car BiK calculated?
Multiply the manufacturer's list price (including options and VAT) by the appropriate percentage, set by CO₂ emissions and electric range. Pure electric cars are 3% in 2025/26; high-emission petrol/diesel can hit 37%. Employee tax = cash equivalent × marginal tax rate. Employer Class 1A NI = cash equivalent × 15%.
Scenario
Bramble Ltd offers an employee, Sara, a choice of two company cars in May 2025. Both have a list price (P11D value) of £45,000. Sara is a higher-rate taxpayer (40%).
Option A: Petrol car
- CO₂ emissions: 145 g/km
- BiK percentage 2025/26: 34%
Option B: Electric car
- CO₂ emissions: 0 g/km
- BiK percentage 2025/26: 3%
Step 1: Cash equivalent (taxable benefit)
| Petrol | Electric | |
|---|---|---|
| List price | £45,000 | £45,000 |
| × BiK % | 34% | 3% |
| Cash equivalent | £15,300 | £1,350 |
Step 2: Income tax for Sara (40%)
| Petrol | Electric | |
|---|---|---|
| Cash equivalent | £15,300 | £1,350 |
| × 40% | £6,120 | £540 |
That's a difference of about £465 a month in extra take-home pay if Sara picks the EV.
Step 3: Employer Class 1A NI (15% from April 2025)
| Petrol | Electric | |
|---|---|---|
| Cash equivalent | £15,300 | £1,350 |
| × 15% | £2,295 | £202.50 |
Bramble Ltd pays nearly £2,100 less per year in Class 1A by offering the EV.
Step 4: Fuel benefit (if employer pays private fuel)
Only relevant for the petrol option; electricity is not "fuel" for BiK.
- Multiplier 2025/26: £28,200
- Fuel benefit = £28,200 × 34% = £9,588
- Sara's tax @ 40% = £3,835
- Class 1A NI @ 15% = £1,438
Most employers no longer offer private fuel because the tax cost almost always exceeds the value of the fuel.
Step 5: Reporting
- Mandatory payrolling starts on 6 April 2027 for company cars, car fuel, vans, van fuel and employer-provided medical benefits. Most remaining benefits follow from April 2028; the date for employer-provided loans and accommodation is not yet confirmed. Payrolling remains voluntary for 2026/27. See HMRC guidance.
- For the 2025/26 example: still possible to use the P11D route — file by 6 July 2026, pay Class 1A NI by 22 July 2026.
- A P46(Car) is needed within 28 days of the end of the quarter when the car is provided, replaced or returned.
Step 6: Total annual employer + employee cost
| Cost | Petrol | Electric |
|---|---|---|
| Employee tax | £6,120 | £540 |
| Employer Class 1A NI | £2,295 | £202.50 |
| Combined annual cost | £8,415 | £742.50 |
Both options exclude the lease/finance cost of the car itself.
Future BiK rate trajectory for EVs
| Year | EV BiK % |
|---|---|
| 2025/26 | 3% |
| 2026/27 | 4% |
| 2027/28 | 5% |
| 2028/29 | 7% |
| 2029/30 | 9% |
Even at 9%, EVs remain dramatically cheaper than petrol/diesel BiKs.
Key takeaway
For a £45,000 vehicle, switching petrol → electric saves roughly £7,700 a year in combined employer + employee tax in 2025/26. EV salary sacrifice schemes can push the saving even higher.
General guidance, not tax advice. Speak to a qualified accountant for advice tailored to your situation. Figures relate to the 2025/26 UK tax year. Source: HMRC, gov.uk.
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