Key takeaways
- EV BIK is 4% of P11D for 2026/27, rising 1% per year to 9% in 2029/30.
- A 40% taxpayer in a £40,000 EV pays roughly £640 per year in BIK, about £53 per month.
- Petrol and diesel equivalents typically attract 25 to 37% BIK, a saving of over £4,000 per year on the same car value.
- BIK is income tax only: employees do not pay National Insurance on a company car BIK.
- Salary sacrifice stacks income tax and NI savings on top of low BIK, often 30 to 55% cheaper than a personal lease.
What is benefit in kind tax?
Benefit in kind (BIK) is a tax on non-cash benefits provided by an employer. When your employer provides a company car for private use, HMRC treats the use of that car as a taxable benefit, and you pay income tax on its deemed value.
For company cars, BIK is income tax only. Employees do not pay National Insurance contributions on a company car benefit. The employer pays Class 1A National Insurance on the benefit at the prevailing rate (source: HMRC CWG5). This distinction matters when comparing salary sacrifice with personal leasing, because sacrificed salary saves employee NI whereas the car BIK does not attract employee NI.
The rules are set by HMRC and published on GOV.UK. The BIK rate is determined by the car's CO2 emissions, which means zero-emission EVs sit in their own low rate band, separate from petrol, diesel, and hybrid vehicles.
How is BIK calculated on an electric car?
The calculation has three steps:
- Find the P11D value. This is the car's list price including VAT and any factory-fit options, but excluding the registration fee and first-year Vehicle Excise Duty (VED).
- Multiply by the appropriate BIK percentage. For zero-emission EVs in 2026/27, this is 4%.
- Multiply by your marginal income tax rate. 20%, 40%, or 45% depending on your total taxable income.
Worked example: £40,000 P11D value × 4% BIK rate × 40% income tax rate = £640 per year (approximately £53 per month).
BIK is collected through PAYE by adjusting your tax code. HMRC will reduce your personal allowance by the taxable benefit amount, so more of your salary falls into your marginal tax band. You do not pay it as a separate bill.
Note: Scotland has different income tax bands and rates. The examples throughout this guide apply to England, Wales, and Northern Ireland.
What is the P11D value of an electric car?
The P11D value is the manufacturer's original list price including VAT, delivery charges, and any factory-fitted options such as a colour upgrade, technology pack, or larger battery. It excludes the vehicle registration fee and first-year VED.
Critically, the P11D value is always the original manufacturer list price, not the price you negotiated, not the finance valuation, and not the current market or resale value. This means:
- A car bought with a dealer discount is still taxed on its full list price.
- A used EV acquired second-hand is taxed on its original new-car list price, not what you paid for it.
- Factory-fit options ordered at the time of manufacture are included; aftermarket accessories are not.
Source: HMRC 480 Expenses and Benefits, Appendix 1. If you are uncertain about a car's P11D value, ask the manufacturer or check the V5C logbook documentation provided at delivery.
Electric car BIK rates 2025/26 to 2029/30
HMRC has published the EV BIK rate schedule through to 2029/30. Rates for 2025/26 to 2027/28 were confirmed at Autumn Statement 2022; rates for 2028/29 and 2029/30 were confirmed at Autumn Statement 2024. The November 2025 Autumn Budget left the EV BIK structure unchanged.
| Tax year | EV BIK rate | Typical petrol / diesel rate |
|---|---|---|
| 2025/26 | 3% | up to 37% |
| 2026/27 | 4% | up to 38% |
| 2027/28 | 5% | up to 38% |
| 2028/29 | 7% | up to 38% |
| 2029/30 | 9% | up to 38% |
Source: GOV.UK, Income tax: increasing the appropriate percentage for company cars. Even at 9% in 2029/30, an EV will attract a BIK rate less than one-quarter of the equivalent petrol or diesel car. The saving remains substantial across the full published schedule.
How does EV BIK compare to a petrol or diesel company car?
The comparison is most striking on a like-for-like basis. Take the same £40,000 list price car as either an EV or a petrol equivalent in a typical mid-range CO2 band (around 130 to 149g/km, which attracts 33% BIK in 2026/27).
| Tax rate | EV (4% BIK) per year | Petrol (33% BIK) per year | Annual saving with EV |
|---|---|---|---|
| 20% taxpayer | £320 | £2,640 | £2,320 |
| 40% taxpayer | £640 | £5,280 | £4,640 |
This is the single biggest financial reason to choose an EV company car in 2026. The BIK saving alone more than offsets the typical premium on an EV's list price over a petrol equivalent, particularly when spread over a 3-year lease term. Source: HMRC company car tax bands / GOV.UK Appendix 2.
Three worked examples by car
The following figures use the 2026/27 BIK rate of 4% and are illustrative. Get personalised advice from your employer's fleet team or a qualified tax adviser before making a decision. Note: Scotland has different income tax bands; figures below apply to England, Wales, and Northern Ireland.
MG4 Long Range (~£28,000 P11D)
- 20% taxpayer: £28,000 × 4% × 20% = £224 per year (£18.67 per month)
- 40% taxpayer: £28,000 × 4% × 40% = £448 per year (£37.33 per month)
Tesla Model 3 RWD (~£40,000 P11D)
- 20% taxpayer: £40,000 × 4% × 20% = £320 per year (£26.67 per month)
- 40% taxpayer: £40,000 × 4% × 40% = £640 per year (£53.33 per month)
BMW i4 or Polestar 4 (~£55,000 P11D)
- 20% taxpayer: £55,000 × 4% × 20% = £440 per year (£36.67 per month)
- 40% taxpayer: £55,000 × 4% × 40% = £880 per year (£73.33 per month)
In each case the BIK cost is a small fraction of the running cost of an equivalent petrol or diesel company car.
Salary sacrifice EVs and BIK: the double benefit
Salary sacrifice is a formal arrangement where you give up a portion of your gross salary, and your employer provides the lease of an EV in its place. Because the sacrifice reduces your gross pay, you save income tax and employee National Insurance on the amount you give up.
The car itself still attracts BIK at the standard EV rate (4% for 2026/27), but the BIK charge is small. When you net the BIK cost against the income tax and NI savings on the sacrificed salary, the result is typically 30 to 55% cheaper than the equivalent personal PCH lease. The saving is largest for 40% taxpayers and on higher-value EVs where the salary sacrifice creates the biggest gross-pay reduction.
Providers such as Electric Car Scheme and Loveelectric publish indicative net-cost calculators that model the saving for different salary bands and EV prices. Use our salary sacrifice EV calculator to model your own saving based on your salary and the car you are considering. See also our full guide on how salary sacrifice for an EV works.
What about used electric cars?
BIK applies to used EVs at the same rate as new ones. The percentage is determined by CO2 emissions, not vehicle age, so a used EV with zero emissions sits at 4% for 2026/27 regardless of when it was manufactured.
The P11D value remains the original list price when the car was new, not the current resale value. This means a used EV that was originally listed at £55,000 but is now worth £35,000 on the second-hand market is still taxed using the £55,000 original list price.
Before taking on a used company car, it is worth checking the original list price via an HPI check or Cap HPI valuation tool, as older EVs with high original prices can carry a larger BIK charge than their current market value might suggest. Source: HMRC 480, Chapter 12.
What happens to EV BIK after 2030?
The published HMRC rate schedule ends at 2029/30, when the EV BIK rate reaches 9%. The November 2025 Autumn Budget confirmed no further changes to the EV BIK structure beyond 2029/30.
Industry expectation is that rates will continue to rise gradually after 2030 as the government brings EV taxation closer to parity with petrol and diesel vehicles, but there is no statutory commitment or published schedule for the period beyond 2029/30.
Practical implication for lease decisions: if you are considering a salary sacrifice contract that extends into the early 2030s, bear in mind that the BIK rate applicable to your car may increase beyond 9% in future years, which would reduce the net saving from salary sacrifice. Shorter contracts or those ending before 2030 avoid this uncertainty. See also our guide to personal EV leasing if salary sacrifice is not available through your employer.
Work out your own BIK saving
Model the actual saving on a real EV with your salary, tax band, and employer's salary sacrifice contribution. Our calculator shows the net monthly cost compared with a personal lease.
Use the salary sacrifice EV calculator →Frequently asked questions
- How much is benefit in kind on an electric car for 2026/27?
- 4% of the car's P11D value, then multiplied by your income tax rate. A 40% taxpayer with a £40,000 EV pays £640 a year, or about £53 a month. The same car as a petrol equivalent at 33% BIK would cost £5,280 a year, a saving of over £4,600.
- Will BIK on electric cars go up?
- Yes, gradually. HMRC confirmed rises to 5% in 2027/28, 7% in 2028/29 and 9% in 2029/30. The November 2025 Autumn Budget left this schedule unchanged. Even at 9%, EVs will still attract a far lower BIK rate than any petrol or diesel company car.
- Do I pay BIK on a salary sacrifice electric car?
- Yes, but at the same low EV BIK rate, 4% for 2026/27. The BIK charge is small and more than offset by the income tax and National Insurance you save on the sacrificed salary. The net result is typically 30 to 55% cheaper than a personal lease.
- Is there benefit in kind on a used electric car?
- Yes, at the same percentage: the BIK rate is set by CO2 emissions, not vehicle age. The P11D value is the original list price, not the current second-hand value, so older EVs with high original prices can still carry a meaningful BIK charge.
- Do I pay National Insurance on benefit in kind?
- Employees do not pay National Insurance on a company car BIK. The employer pays Class 1A National Insurance on the benefit at the prevailing rate. This is one reason salary sacrifice works so well: you save employee NI on the salary you sacrifice, and you do not pay employee NI on the car benefit.