Lots of people are offered company cars as part of their work – perhaps you drive a lot of miles because of your job, or your company offers it as a perk. 

Usually when you’re offered a perk like this on top of your salary you’ll be required to pay tax on the value of whatever it is you’ve been given, because you’ve been paid in stuff on top of the cash monies handed out every month. 

These perks are called ‘benefit in kind’, and they apply if you’re being given something at a discount and also if you get a car using a salary sacrifice scheme (which is where you pay for something out of your salary before tax). 

What is benefit in kind on cars? 

It’s usually called BIK, and you pay a percentage of the value of the car each month. Actually it’s a bit more complicated than that – your car has a P11D value (the P11D is the form your finance department has to send to HMRC with all this info on it) for the initial calculation. 

The P11D value is what the car cost including optional extras and delivery fees but not registration fees and road tax. It doesn’t take into account discounts you might had on the car, either.  

Cars are assigned a ‘BIK rate’ based on their emissions, and it’s the same for all electric cars. It does vary a lot if you’re driving a PHEV. For the 2026/2027 financial year it’s 4% for EVs. 

You take the P11D value, times it by the BIK rate and times that by your tax band (20%, 40% or 45%) – divide that number by 12 and that’s what you pay each month.

Let’s take a Skoda Enyaq 60 SE L as an example. That car has a list price of £39,010 and we haven’t added any options because we’re both cheap and bad at maths, but the P11D value is £38,945. Times that by 4% and we have £1,558. Times that by 20% and we have £312 due a year, or £26 a month. Which is a bargain for a car, really. 

Well that sounds fairly simple

Let’s not get ahead of ourselves. If it was a combustion car you’d have to pay tax on and fuel your employer was paying for, but thankfully there are tax breaks for the electricity. 

The BIK rate on EVs is 3% in the 2025/26 financial year, and is increasing by 1% each financial year until 2028/2029 when it jumps from 5% to 7% and then the year after to 9%. Because we can’t have nice things and the government wants our money. 

What about PHEVs? 

Please don’t ask us about those. There are five separate BIK brackets for cars with official CO2 emissions of 1–50g/km depending on the numbers of miles they’re rated for in electric mode. 

If the car can do more than 130 miles it’ll be taxed at 4% in 2026/27 same as an EV. If it manages less than 30 miles it’s taxed at 15%. Those five 1–50g/km brackets will be merged into one in 2028/29 and all those car will have to pay 19% BIK. 

After 51g/km emissions the brackets go up in 5g/km increments, increasing the percentage rate each time. Probably best to look it all up depending on what car you’re looking at. 

So EVs are much cheaper company cars than petrols? 

Oh yes. Let’s get back to that Skoda Enyaq and compare, shall we? Obviously the whole of the Enyaq range is electric, but perhaps you’re looking at a similar size SUV in the Skoda range – the Karoq. 

If you went for the SE L version of the car with a 1.5-litre petrol engine it’s much cheaper on paper than the Enyaq with a P11D value of £33,695. But at a BIK rate of 33% it’ll cost £185 a month in tax. Suddenly sitting at a charger for a few minutes a month doesn’t look so bad. 

That’s even before we mention £540 versus £10 in first year VED. At which point it's worth mentioning the VED rules – if your EV has a list price over £50,000 you'll have to pay more in road tax from 1 April 2025, and the 'expensive car supplement' applies from the second year of tax. You can read more about that here. 

What car should I go for? 

That's much more in our comfort zone. You're usually given a list of cars or a particular budget from your company's provider and you can choose from within that. Electric cars are usually priced very strongly in those lists, but you'll want to look for something that offers the best blend of practicality and range for your budget. We've got a company cars tab in our reviews section for you to have a look at.