Company Car Tax Calculator UK

Demystify Your UK Company Car Tax (BIK) Use Our Calculator to Estimate Costs & Make Smart Vehicle Choices

A company car can feel like a fantastic perk, but it’s not entirely ‘free’. Her Majesty's Revenue and Customs (HMRC) sees it as a non-cash benefit, or a 'Benefit-in-Kind' (BIK), which means you have to pay tax on it.

Understanding how much tax you'll owe can be confusing, with calculations based on the car's value, its CO2 emissions, and your personal income. Getting it wrong could mean a nasty surprise on your payslip.

That's where our simple tool comes in. This guide will walk you through everything you need to know about company car tax and how our Company Car Tax (BIK) Calculator can give you an accurate estimate in seconds, helping you choose the right vehicle for your needs and your wallet.

What is Company Car Tax (Benefit-in-Kind)?

Benefit-in-Kind (BIK) is the term for any non-cash benefit you receive from your employer. A company car that is available for your private use (including commuting) is one of the most common examples.

Because this 'perk' has a cash value, HMRC taxes you on it. The amount of tax you pay depends on three key factors:

The P11D Value of the Car: This is essentially the car's list price, including VAT and any optional extras, but excluding the first year's road tax and registration fee.
The BIK Percentage Rate: This is determined primarily by the car's official CO2 emissions. The lower the emissions, the lower the BIK rate. Electric cars have the lowest rates.
Your Personal Income Tax Rate: You pay the tax at your highest rate of income tax – 20% (basic rate), 40% (higher rate), or 45% (additional rate). Scottish rates differ slightly.

Think of it like this: HMRC calculates a 'taxable value' for your car perk, and you pay income tax on that value.

How to Use Our Company Car Tax (BIK) Calculator

Our calculator is designed to be straightforward and fast. Forget wrestling with complex tax tables; just enter a few details to see your estimated monthly and annual tax cost.

Here’s your step-by-step guide:

Step 1: Enter the Car's P11D Value (£): This is the official list price of the car, including delivery charges and any factory-fitted options. You can usually find this on the manufacturer's website or by asking your fleet manager.
Step 2: Enter the Official CO2 Emissions (g/km): This is a crucial figure for determining your tax rate. It's measured in grams per kilometre (g/km) and can be found in the car's brochure or V5C logbook.
Step 3: Select the Fuel Type: Choose from Petrol, Diesel (RDE2 compliant), Diesel (non-RDE2), or Electric. Note that non-RDE2 compliant diesel cars often face a higher BIK rate.
Step 4: Select Your Income Tax Rate: Choose the income tax band you fall into (20%, 40%, or 45%). If you live in Scotland, use the equivalent Scottish rate.

Your Results

Once you hit 'Calculate', the tool will instantly show you:

Taxable Benefit Value: The total value of the benefit HMRC will tax you on.
Annual Company Car Tax: The total BIK tax you'll owe for the year.
Monthly Company Car Tax: The amount that will likely be deducted from your salary each month.

Worked Example: How the Tax is Calculated

Let's see how the calculation works in practice for a typical petrol car.

Car: A petrol hatchback
P11D Value: £32,000
CO2 Emissions: 125 g/km (This falls into the 30% BIK band for the current tax year)
Your Tax Rate: 40% (Higher Rate taxpayer)

The Calculation:

Calculate the Taxable Value: P11D Value x BIK Rate
- £32,000 x 30% = £9,600
Calculate the Annual Tax: Taxable Value x Your Tax Rate
- £9,600 x 40% = £3,840 per year
Calculate the Monthly Cost: Annual Tax / 12
- £3,840 / 12 = £320 per month

This manual calculation shows just how quickly the costs can add up. The easy way is to use our free Company Car Tax (BIK) Calculator to compare different vehicles instantly.

The Rise of Electric Cars and BIK Tax Savings

The UK government offers significant tax incentives for choosing low and zero-emission vehicles. This makes electric cars (EVs) and some plug-in hybrids (PHEVs) incredibly attractive as company cars.

Fuel Type	Typical CO2 (g/km)	BIK Rate (2024/25)	Example Annual Tax (on £45k car, 40% taxpayer)
Electric	0	2%	£360
PHEV	40	12%	£2,160
Petrol	140	33%	£5,940
Diesel	135	36%	£6,480

As you can see, choosing an electric car over a traditional petrol or diesel equivalent could save you thousands of pounds in tax every single year. Use the calculator to run the numbers on an EV – the savings are often too good to ignore.

Common Mistakes to Avoid

Forgetting Optional Extras: The P11D value must include all extras fitted to the car, like metallic paint, larger alloy wheels, or a panoramic sunroof. Forgetting these will result in an underestimate of your tax.
Using the Wrong CO2 Figure: Always use the official WLTP (Worldwide Harmonised Light Vehicle Test Procedure) CO2 figure. A small difference can push the car into a higher BIK band.
Ignoring the Diesel Surcharge: Diesel cars that don't meet RDE2 (Real Driving Emissions Step 2) standards are subject to a 4% BIK surcharge, up to the maximum of 37%.
Not Accounting for Contributions: If you make a capital contribution towards the cost of the car, this can reduce the P11D value for tax purposes.

What to Do After You Get Your Result

Your calculator result is the starting point for making a smart financial decision. Here's what to do next:

Compare, Compare, Compare: Run scenarios for all the cars on your shortlist. See how a cheaper model or a low-emission hybrid could impact your monthly take-home pay.
Talk to Your Employer: Discuss the vehicle options available under your company's scheme. Your fleet manager can provide the exact P11D values and specifications.
Consider the Cash Alternative: Some employers offer a cash allowance instead of a car. While this gives you flexibility, remember the cash is taxed as salary and you'll have to cover all running costs yourself, including insurance. The expert brokers at WeCovr can help you find competitive car insurance if you go this route.
Budget Accordingly: Once you know the monthly BIK cost, you can build it into your personal budget and plan your finances with confidence.

Choosing a company car is one part of managing your overall financial wellbeing. It's also wise to consider how you protect your most important assets: your health and your family's security.

Private Medical Insurance (PMI) gives you control over your healthcare. It allows you to bypass long NHS waiting lists for consultations, diagnosis, and treatment for eligible conditions. Crucially, UK PMI is designed to cover acute conditions that arise after your policy begins. It does not cover pre-existing or chronic conditions like asthma or diabetes. To understand your options, learn more about private health insurance.

Life Insurance provides a financial safety net for your loved ones if you were no longer around. A tax-free lump sum could help them pay off the mortgage, cover bills, and maintain their standard of living during a difficult time. Find out how to protect your family with life insurance.

At WeCovr, we are expert brokers who can help you navigate the market and find the right policy for your needs. Plus, if you take out a PMI or life insurance policy with us, we can often offer discounts on other types of cover you may need.

Frequently Asked Questions (FAQ)

Ready to Choose Your Next Company Car?

Don't let confusing tax rules lead to an expensive mistake. Empower yourself with knowledge and make an informed decision.

Use the free Company Car Tax (BIK) Calculator now to estimate your costs and compare your options. For expert help with your wider insurance needs, speak to the friendly team at WeCovr. As a bonus, our clients get complimentary access to CalorieHero, our AI-powered calorie and nutrition tracking app, to support their health and wellness journey.