Best Cars for Company Car Tax and Low BiK Rates

For 2026/27, the best cars for company car tax are pure electric models, which sit at a 4% Benefit-in-Kind rate against a ceiling of 37% for the highest-emission petrol and diesel cars. On a £40,000 electric car, a basic-rate taxpayer pays about £320 a year in company car tax. The same money in a petrol car emitting 120g/km of CO2 costs closer to £2,400. Long-range plug-in hybrids come next, and everything with a combustion engine trails a long way behind.

How Your Company Car Tax Bill Is Built

The bill has three inputs: the car’s P11D value, its BiK percentage (set by HMRC based on CO2 emissions and, for low-emission cars, electric range), and your marginal income tax rate.¹ Multiply P11D by BiK percentage to get the taxable benefit, then multiply that by your tax rate (20%, 40%, or 45%) to get what you actually pay.²

A worked example makes the mechanics obvious. A car with a P11D of £35,000 and a BiK of 25% produces a taxable benefit of £8,750. A basic-rate taxpayer pays £1,750 a year. A higher-rate taxpayer pays £3,500 for the identical car. That doubling effect is why the BiK percentage matters twice as much for anyone earning above £50,270.

The 2026/27 BiK Rates

HMRC’s full table for 2026/27 runs from 4% at the bottom to 37% at the top.³ The bands that matter most:

Zero emissions (pure electric): 4%
1–50 g/km, electric range over 130 miles: 4%
1–50 g/km, 70–129 miles electric range: 7%
1–50 g/km, 40–69 miles electric range: 10%
1–50 g/km, 30–39 miles electric range: 14%
1–50 g/km, under 30 miles electric range: 16%
51–99 g/km: 17%–25%, rising in roughly 1% increments per 5 g/km
100–154 g/km: 26%–36%
155 g/km and above: 37% (the ceiling)

The 4% to 16% spread within the 1–50 g/km band tells you why the certified electric range on a plug-in hybrid spec sheet translates directly into cash. Cross a threshold by a mile and your bill can shift by hundreds of pounds a year.

Best Electric Cars for Company Car Tax

Every pure EV qualifies for the 4% rate, so the real question is P11D value. 4% of £25,000 is a lot less than 4% of £50,000, and that gap decides the size of your bill.

At the budget end, cars like the MG4, Citroën ë-C4, and Vauxhall Corsa Electric sit in a £25,000–£32,000 P11D range. On a £28,000 EV, a basic-rate taxpayer pays roughly £224 a year, or under £19 a month. A higher-rate taxpayer pays about £448. At those numbers company car tax barely registers.

In the mid-range, a Tesla Model Y (P11D around £46,000) or a BMW iX1 costs a higher-rate taxpayer somewhere between £60 and £75 a month. Compare that with a £46,000 petrol car emitting 130 g/km: taxable benefit of £14,720, annual bill of £5,888 at the higher rate. The EV bill on the same purchase price works out to £736. That is more than £5,000 a year kept in your pocket for the same list price of car.³

Premium EVs (BMW iX, Volvo EX90, Mercedes EQS) push P11D values above £70,000, but even there a higher-rate taxpayer pays roughly £110–£130 a month. A comparable petrol executive car at the 37% ceiling can attract more than £10,000 a year in tax alone. The higher the list price, the bigger the swing in favour of going electric.

Best Plug-in Hybrids for Company Car Tax

If a pure EV won’t work for your driving pattern, a plug-in hybrid can still undercut petrol or diesel comfortably, but only if the electric range holds up. The BiK system rewards genuine battery capability, and 2026/27 pricing bakes that in.

A PHEV certified above 130 miles of electric range gets the same 4% rate as a pure EV, though very few models achieve that figure.³ Cars like the BMW 330e and Skoda Octavia iV typically land in either the 40–69 mile bracket (10%) or the 70–129 mile bracket (7%), depending on the specific variant. Check the manufacturer’s WLTP electric range before you commit, because a few miles either side of a threshold shifts the rate meaningfully.

At 10% BiK, a £40,000 PHEV produces a £4,000 taxable benefit and costs a basic-rate taxpayer £800 a year, less than half what a petrol equivalent would run. The value dries up at the short-range end. A PHEV with under 30 miles of electric range sits at 16%, and if you can’t reliably plug it in at home or work, the tax advantage may not cover the price premium over a good petrol car.

The Diesel Trap: The RDE2 Supplement

Pure diesel cars that don’t meet the Real Driving Emissions Step 2 (RDE2) standard get an extra 4% loaded onto their BiK, up to the 37% cap.⁴ Diesel hybrids are exempt. Most new diesels sold since around 2020 are RDE2-compliant, but older models and some budget options aren’t. Ask before signing: on a £35,000 diesel emitting 120 g/km, the difference between compliant (30%) and non-compliant (34%) is £560 a year for a higher-rate taxpayer. Given diesel already sits in high BiK bands, a non-compliant diesel is one of the most expensive company cars you can pick.

How P11D Value and Options Change the Bill

P11D value is list price plus VAT, delivery, and any factory or dealer-fitted extras. It excludes first registration fee and annual VED.⁵ It uses manufacturer’s list price, not the fleet discount your employer negotiated. A £3,000 saving on the deal saves you nothing on tax.

Options inflate the P11D even when they have nothing to do with emissions. Metallic paint, leather, a panoramic roof: all taxable. On a 4% EV, the pain is modest. Add £5,000 of extras and the taxable benefit rises by £200, or £40 a year for a basic-rate taxpayer. On a petrol car at 30%, the same options add £1,500 to the benefit and £600 a year at the higher rate. Be more careful with the options list on higher-emission cars.

You can also cut the P11D by making a capital contribution toward the car, capped by HMRC at £5,000. The reduction applies every year you have the car.⁶ On a £50,000 EV at 4%, a £5,000 contribution saves a higher-rate taxpayer £80 a year. Useful over three years, but not a game-changer. The maths get more attractive on high-emission cars, but if you’ve already gone electric the effect is small.

Salary Sacrifice: Where the EV Advantage Compounds

Salary sacrifice is where a low-BiK electric car really pays. Your gross salary is reduced by the monthly cost of the car before income tax and National Insurance are applied. You then pay BiK on the car itself, which at 4% is trivial.

A higher-rate taxpayer leasing a £35,000 EV through salary sacrifice typically saves 30%–40% versus a personal lease of the same car. Over a three-year lease those savings can reach several thousand pounds. Basic-rate taxpayers save less in absolute terms but still beat private leasing.

A few practical checks. Your post-sacrifice salary cannot fall below the National Minimum Wage. A lower gross salary may cut mortgage borrowing capacity and any employer pension contribution calculated as a percentage of pay. Statutory maternity and paternity pay are generally based on pre-sacrifice earnings. Most schemes bundle insurance, maintenance, and breakdown, so the all-in comparison is often better than the lease headline suggests.

Company Car or Cash Allowance

Cash allowances used to be the smarter choice. Electric BiK rates have reversed that for most people. A £500 monthly cash allowance is taxed as ordinary income, leaving a basic-rate taxpayer with around £370–£380 in hand after tax and NI, and less for a higher-rate taxpayer. You then fund a car with what’s left.

Set that against a £40,000 company EV at 4%, where a higher-rate taxpayer pays just £640 a year in BiK.³ The employer covers lease, insurance, and maintenance. For anyone planning to run a new EV either way, turning down the company car for cash almost never adds up at current rates. The one scenario where cash still wins: you already own a paid-off cheap car and have no intention of changing it. Then the allowance is money on top of a vehicle you’d have anyway.

Workplace and Home Charging

Employer-provided charging at or near the workplace is exempt from income tax and NI when the facilities are open to employees generally.⁷ Charge every day at work without creating any additional taxable benefit.

Reimbursement for home electricity used to charge a company car is also not taxable, provided it relates solely to the company vehicle.⁸ HMRC’s advisory rates for early 2026 are 7p per mile for home charging and 15p per mile for public charging. These are updated periodically, so check the current figures before you claim.

What Rates Do Between Now and 2029/30

HMRC has published BiK rates through to 2029/30, which is unusually far ahead. Zero-emission rates climb steadily:⁹

2025/26: 3%
2026/27: 4%
2027/28: 5%
2028/29: 7%
2029/30: 9%

Even at 9%, EVs stay far cheaper than the combustion alternative. A £40,000 EV at 9% produces a £3,600 benefit, £1,440 a year for a higher-rate taxpayer. A comparable 30% petrol car would still cost £4,800. The advantage narrows but doesn’t close, and the ceiling for the dirtiest cars rises to 38% in 2028/29 and 39% in 2029/30, widening the gap on the other side.

If you are signing a three- or four-year deal in 2026, budget on the rate that will apply in the final year, not the starting rate. A three-year lease from April 2026 runs through 4%, 5%, and 7%. On a £45,000 EV, that’s roughly £720, £900, and £1,260 a year for a higher-rate taxpayer. Still a fraction of any combustion equivalent, but worth building into the monthly plan before you sign.