Last updated: 16 October 2026
What is the benefit in kind if you buy a car through your company?
If your company buys a car and makes it available for your private use, you pay income tax on a benefit-in-kind based on the car’s list price and CO2 emissions, and the company pays Class 1A National Insurance at 15%. For 2026/27, electric cars are taxed at 4% of list price, rising to 5% in 2027/28, while petrol and diesel cars can be taxed at up to 37%. That makes electric cars much cheaper to run through a company. The company can also claim capital allowances: 100% first-year allowance for new zero-emission cars.
How the charge is worked out
- Take the car’s list price, including options, when new.
2. Apply the percentage for its CO2 emissions.
3. Reduce for periods it wasn’t available or for private use contributions.
4. Add fuel benefit if the company pays for private fuel.
Examples of rates for 2026/27
| Car | Percentage |
| Electric (0g/km) | 4% |
| Plug-in hybrid 1–50g/km | Depends on electric range, 4% to 16% |
| Petrol 100g/km | 26% |
| Petrol 150g/km | 36% |
| Diesel not RDE2 | Add 4%, maximum 37% |
Worked example
A director chooses an electric car with a £45,000 list price. The benefit is 4% × £45,000 = £1,800. As a higher rate taxpayer, she pays £720 tax. The company pays Class 1A NIC of £270 and claims 100% first-year allowance on the cost. A £45,000 petrol car at 30% would create a £13,500 benefit and £5,400 of tax.
Fuel benefit
If the company pays for private fuel, the fuel benefit is the car’s percentage × £29,200 for 2026/27. Electricity isn’t fuel for this purpose, but charging at work is exempt.
Buying the car personally instead
If you own the car, the company can pay you 55p a mile for the first 10,000 business miles in 2026/27 (45p in earlier years), then 25p, tax-free.
Common mistakes
- Using purchase price rather than list price
- Forgetting fuel benefit
- Not reporting the benefit on P11D or payroll
- Assuming hybrids are as cheap as electric cars
Records to keep
Keep the purchase invoice, list price details, any private use payments and mileage logs.
Selling the car later
When the company sells the car, any difference between the sale price and the tax written-down value creates a balancing charge or allowance. For an electric car on which 100% first-year allowance was claimed, the full sale proceeds are usually taxable in the company. If the car is transferred to you personally below market value, the difference is a further benefit in kind.
Is a company car worth it?
For electric cars, the low benefit rate plus corporation tax relief on the cost usually makes company ownership cheaper than buying personally out of taxed dividends. For petrol and diesel cars, the high benefit charge usually makes personal ownership with mileage claims cheaper. Run the numbers for your own tax rate before ordering.
Frequently asked questions
Is a double cab pick-up a car?
Yes, from April 2025 for most purposes.
Can I lease instead?
Yes, lease payments are deductible, restricted 15% for cars over 50g/km.
Does a car on salary sacrifice change the charge?
The benefit applies, but electric cars keep low rates.
Do I pay VAT?
VAT on car purchase is usually blocked.
Related: electric car allowance, first-year allowances and capital allowances on company cars.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with company car tax advice. See our limited company accountants service, or contact us for a free, no-obligation quote.
This page is general guidance based on HMRC rules for the 2026/27 tax year, checked against gov.uk on 16 October 2026. It is not personal advice, so speak to an accountant about your own situation.
