Company car tax is three numbers multiplied together. The P11D VALUE, which is the list price with delivery and options and is not what your employer paid. The APPROPRIATE PERCENTAGE, set by the car's CO2 emissions and, for a plug-in hybrid, its electric range. And your own MARGINAL rate of Income Tax. For 2026/27 GOV.UK's table for petrol and hybrid cars runs from 4% for a zero-emission car to a maximum of 37%, so a £40,000 electric car is a £1,600 benefit and costs a basic-rate driver £320 a year, while a £30,000 petrol car in the top band is an £11,100 benefit and costs the same driver £2,220.
The three numbers, in order
P11D value first: the manufacturer's list price including VAT, delivery and any factory options, less any capital contribution you made. Discounts your employer negotiated do not reduce it, which is why a car bought cheaply can still be taxed dearly. Then the appropriate percentage from GOV.UK's table for the tax year, which for 2026 to 2027 starts at 4% for a car emitting 0g/km and rises to 37% at 170g/km and above; a plug-in hybrid with an electric range of 1 to 50 miles sits between 4% and 16% depending on that range. Multiply the two for the taxable benefit, then multiply by 20%, 40% or 45% depending on where the benefit falls in your income.
What it costs at the two ends of the table
A £40,000 zero-emission car at 4% is a £1,600 benefit: £320 a year to a basic-rate driver, £26.67 a month, and £640 a year at higher rate. A £30,000 petrol car in the 37% band is an £11,100 benefit: £2,220 a year at basic rate, £185 a month, and £4,440 at higher rate. A £45,000 electric car at 4% is £1,800, so £360 or £720. The spread is the whole policy: the same money spent on a different car changes your tax bill by a factor of seven, and the electric figure is rising by a percentage point a year, so it is worth checking the table for the year you will actually be driving it.
How you pay it, and why your code changed
You do not get a bill. The benefit is coded: HMRC reduces your tax-free allowance by the taxable value, so the tax comes out of your monthly pay. That is why a company car makes a tax code fall, often mid-year, and why the first payslip after it is applied looks like a mistake. Where the employer payrolls benefits instead, the value is added to your taxable pay each period and the code is left alone, which is cleaner. Either way the annual cost is the same figure worked out above; only the timing differs.
The employer's side, and fuel
Your employer pays Class 1A National Insurance on the same taxable value, and GOV.UK states the rate plainly: "The National Insurance Class 1A rate on expenses and benefits for 2026 to 2027 is 15%." So the £1,600 electric benefit costs the employer £240 and the £11,100 petrol benefit £1,665, on top of the car. Free private FUEL is a separate benefit and an expensive one, because it is charged on a fixed multiplier rather than on what you used: on a high-percentage car it frequently costs more in tax than the fuel is worth, and giving it up is one of the few changes that pays for itself immediately.
Company car tax checker: testing a figure you have been given
Ask for the P11D value in writing, look the appropriate percentage up against the car's CO2 figure and, for a hybrid, its electric range, and multiply. Then compare against your own marginal rate: the benefit sits on top of your salary, so on a salary near £50,270 part of it can be taxed at 20% and the rest at 40%, and near £100,000 it drags the Personal Allowance withdrawal with it at an effective 60%. HMRC also publishes a company car and car fuel benefit calculator for the employer's own working, and your payslip's tax code is the place the answer actually shows up.
Questions people ask about company car tax calculator
How much is company car tax?
P11D value times the appropriate percentage times your tax rate. A £40,000 electric car at 4% costs a basic-rate driver £320 a year; a £30,000 petrol car at 37% costs the same driver £2,220.
What is the P11D value?
The list price including VAT, delivery and factory options, less any capital contribution you made. It is not what your employer paid, so a negotiated discount does not reduce the tax.
Why is an electric company car so much cheaper to tax?
Because the appropriate percentage is 4% for a zero-emission car in 2026/27 against up to 37% at the top of the table. The tax follows CO2, not price.
Does a company car change my tax code?
Usually yes. HMRC reduces your tax-free allowance by the taxable value so the tax comes out of your pay each month. Where the employer payrolls benefits instead, the value is added to taxable pay and the code stays as it was.