P11D Tax on Electric Cars: BIK Rates, Deadlines, and Payrolling

A fully electric company car is taxed at 4% of its list price for the 2026/27 tax year, which makes the P11D tax on electric cars one of the lightest employee benefit charges in the UK tax system. Your employer records the car on a P11D form, HMRC applies the 4% rate to the official list price, and the resulting figure is added to your taxable income. Even as the rate rises gradually toward the end of the decade, electric company cars stay far cheaper in tax terms than petrol or diesel equivalents, where the rate can reach 37%.

The BIK Rate for Electric Cars in 2026/27

Zero-emission cars carry a 4% Benefit in Kind rate for 2026/27, up from 3% the previous year. That rate applies to every fully electric car regardless of list price, range, or battery size.¹

Plug-in hybrids with CO2 emissions between 1 and 50 grams per kilometre are taxed on a tiered scale based on electric-only range:

130+ miles of electric range: 4%
70–129 miles: 7%
40–69 miles: 10%
30–39 miles: 14%
Under 30 miles: 16%

Conventional petrol and diesel cars start at 17% for the cleanest models (51–54g CO2/km) and climb to 37% at 155g/km or above. Two cars with the same list price can produce wildly different tax bills depending on which side of that divide they sit.

How the Tax Is Calculated

The calculation has three steps. Take the car’s P11D value (its official list price including VAT, delivery, and factory-fitted extras), multiply by the BIK percentage, then multiply the result by your income tax rate.

For a fully electric car with a P11D value of £40,000, the numbers for 2026/27 look like this:

Taxable benefit: £40,000 × 4% = £1,600 per year
Basic-rate taxpayer (20%): £320 annual tax
Higher-rate taxpayer (40%): £640 annual tax
Additional-rate taxpayer (45%): £720 annual tax

A petrol car at the same list price with a 30% BIK rate would cost a basic-rate taxpayer £2,400 a year in tax, more than seven times the electric figure. If the car is available for only part of the year, the benefit is pro-rated. A car received on 6 October would generate roughly half the annual charge.

What Goes Into the P11D Value

The P11D value is not the price you negotiate at the dealer. It is the published list price on the day before first registration, including VAT, delivery, and any customs or excise duty. The new car registration fee is excluded because HMRC treats it as an administration fee.²

Non-standard accessories fitted before the car is first made available get added to the list price at the manufacturer’s or distributor’s list price, not the dealer’s actual charge.² Premium paint, larger wheels, tow bars, upgraded audio: all of it increases the taxable value. Accessories added later get included from the tax year they are fitted, but only if the individual accessory costs £100 or more.

You can reduce the P11D value with a personal capital contribution toward the purchase price, capped at £5,000.³ On a £40,000 car with a £5,000 contribution, the taxable base drops to £35,000 and your 4% benefit falls from £1,600 to £1,400. Separately, if you pay your employer for private use of the car, those payments reduce the cash equivalent after the percentage is applied, and there is no cap on that reduction.

Salary Sacrifice for Electric Cars

Salary sacrifice is where the numbers get really compelling. You give up part of your gross salary in exchange for the car. Normally the “optional remuneration” rules would tax you on the higher of the BIK value or the salary sacrificed, but zero-emission cars are exempt from that rule. The taxable benefit is calculated on the BIK value alone.⁴

An employee sacrificing £500 a month of gross salary for an electric car might face a BIK tax of only around £27 a month at basic rate, while avoiding roughly £160 in combined income tax and employee NICs on the sacrificed pay. The employer avoids employer NICs on that pay too. Cars with CO2 emissions above 75g/km do not get the exemption, which is why salary sacrifice schemes now focus almost entirely on fully electric models.

Charging Costs

Workplace charging of a fully electric company car does not trigger a fuel benefit charge. Electricity is specifically excluded from the definition of “fuel” for zero-emission vehicles.⁵ The exemption applies only to fully electric cars; plug-in hybrid drivers could face a fuel benefit charge for workplace electricity.

If you charge at home and your employer reimburses you, HMRC’s advisory electricity rates set the tax-free ceiling. From 1 June 2026 those rates are 7 pence per mile for home charging and 15 pence per mile for public charging.⁶ Reimbursements within these limits are not taxable and do not need to appear on the P11D. Anything paid above them is taxable.

What the P11D Reports

Employers report company cars in Section F of the P11D. The form captures the make and model, the date of first registration, the date the car was made available to the employee, CO2 emissions (0g/km for a fully electric car), the list price, and details of any accessories and capital contributions. VAT must be included in the list price figure even where the employer cannot recover it.⁷

Once filed, HMRC adjusts your tax code so the extra tax is collected through your monthly payslips over the following year, not billed separately.⁸

Deadlines and Penalties

Employers face two hard summer deadlines. P11D forms for the preceding tax year must reach HMRC, and a copy must go to each affected employee, by 6 July. Class 1A National Insurance contributions on the total value of reported benefits must be paid by 22 July electronically, or 19 July by cheque.⁹

The Class 1A rate for 2026/27 is 15%, up from 13.8% in April 2025.¹⁰ The employer pays it, not the employee, and it applies to the full cash equivalent of every reported benefit.

Late filing of the P11D(b) return triggers an automatic penalty of £100 for every 50 employees (or part of 50) for each month or part-month the return is overdue.⁹ Interest also accrues on any unpaid Class 1A contributions. A business with 200 employees would face £800 in penalties alone for a two-month delay, before interest.

Mandatory Payrolling From April 2027

The P11D system is being replaced. From April 2027, most benefits in kind, including company cars, must be reported through Real Time Information and the tax collected through PAYE each pay period. The original deadline was April 2026, but the government pushed it back to give employers and software providers more time.¹¹

Employment-related loans and living accommodation will stay on the P11D for a temporary period, with voluntary payrolling from April 2027 and a mandatory date to be set later. Employers can still opt in to voluntary payrolling ahead of April 2027, but the voluntary registration service closes after 5 April 2026.¹¹

For employees, the practical effect is that the tax on your company car comes out of each payslip in real time, rather than being collected through a tax code adjustment the following year. The amount owed does not change; it just gets spread across your pay packets as you earn.

Future BIK Rates for Electric Cars

The government has published the rate trajectory for zero-emission cars through the end of the decade:

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

Even at 9%, a fully electric car will still attract roughly a quarter of the BIK rate faced by a typical petrol car.¹ For anyone weighing up a company car order today, the confirmed low rates over the next three to four years make the financial case for going fully electric rather than hybrid.

1
GOV.UK. Work Out the Appropriate Percentage for Company Car Benefits (480: Appendix 2)
2
GOV.UK. How to Work Out the Benefit of a Company Car (480: Chapter 12)
3
HM Revenue & Customs. Employment Income Manual EIM24355 – Car Benefit Calculation Step 3: Capital Contributions
4
legislation.gov.uk. Income Tax (Earnings and Pensions) Act 2003 – Part 3, Chapter 6
5
GOV.UK. Workplace Charging for All-Electric and Plug-in Hybrid Vehicles
6
GOV.UK. Advisory Fuel Rates
7
GOV.UK. How to Complete P11D and P11D(b) – Section: Effects of VAT
8
GOV.UK. Expenses and Benefits for Employers: Reporting and Paying
9
GOV.UK. Expenses and Benefits for Employers: Deadlines
10
GOV.UK. 2025: Class 1A National Insurance Contributions on Benefits in Kind
11
GOV.UK. Technical Note: Mandating the Reporting of Benefits in Kind and Expenses Through Payroll Software: An Update