Benefit-in-Kind (BIK) tax is what you pay for the personal use of a car your employer provides. Electric cars get a far lower rate than petrol or diesel — by design, to encourage the switch — and that gap is locked in by law for several years yet.
How BIK is calculated
BIK tax = P11D value × BIK rate × your income tax rate. The P11D value is the car's full list price including VAT and any factory-fitted options (not what your employer actually paid, and not reduced by any discount). Multiply that by the car's BIK percentage to get the "taxable benefit," then tax is due on that benefit at your normal income tax rate (20%, 40%, or 45%).
Worked example: a £45,000 electric car at the 2026/27 EV rate (4%) and a 40% tax rate works out at roughly £720 a year. The same car as a 150g/km-CO2 petrol equivalent, at a 36–37% BIK rate, would cost around £6,500–£6,700 a year — several thousand pounds more, for the same list price.
EV BIK rates are set out for years ahead
| Tax year | Fully electric BIK rate |
|---|---|
| 2025/26 | 3% |
| 2026/27 | 4% |
| 2027/28 | 5% |
| 2028/29 | 7% |
| 2029/30 | 9% |
These rates are already legislated through to 2030, so if you're choosing a company car now you can work out roughly what you'll pay each year of a typical lease without guessing at future policy changes.
A note on plug-in hybrids
Plug-in hybrids currently get a lower rate too, scaled by electric-only range — but that advantage is being phased out: from April 2028, all plug-in hybrids move to a flat 18% rate regardless of range, which is a big jump for anyone part-way through a longer lease. Worth factoring in if you're weighing a PHEV against a full EV for a multi-year company car choice.
BIK rates and thresholds are set by the government and can change — always check the current rate for your specific car and tax year on GOV.UK, or ask your employer's payroll/finance team, before relying on any figure here for a financial decision.
Check current rates on GOV.UK