Company cars
A company car provided for both business and private use creates a taxable benefit in kind. This is calculated by multiplying the car’s list price, including fitted accessories, by the appropriate percentage based on its CO₂ emissions. Diesel cars attract a 4% supplement unless they meet Euro 6d emissions standards, subject to an overall maximum percentage of 37%. Any capital contribution made by the employee towards the car can reduce the list price used in the calculation, up to a maximum of £5,000.
2026/27 car benefit percentages
| CO2 emissions (g/km) | % of car’s price taxed |
|---|---|
| 0 | 4 |
| 1–50: electric range over 130 | 4 |
| 1–50: electric range 70–129 | 7 |
| 1–50: electric range 40–69 | 10 |
| 1–50: electric range 30–39 | 14 |
| 1–50: electric range under 30 | 16 |
| 51–54 | 17 |
| 55–59 | 18 |
| 60–64 | 19 |
| 65–69 | 20 |
| 70–74 | 21 |
| 75–79 | 21 |
| 80–84 | 22 |
| 85–89 | 23 |
| 90–94 | 24 |
| 95–99 | 25 |
| 100–104 | 26 |
| 105–109 | 27 |
| 110–114 | 28 |
| 115–119 | 29 |
| 120–124 | 30 |
| 125–129 | 31 |
| 130–134 | 32 |
| 135–139 | 33 |
| 140–144 | 34 |
| 145–149 | 35 |
| 150–154 | 36 |
| 155 and above | 37 |
Car fuel benefit
If an employer pays for private fuel in a company car, this is a separate taxable benefit, calculated by multiplying the car benefit percentage by the statutory fuel figure of £29,200. It’s reduced pro rata if private fuel stops part-way through the year, and to nil if the employee pays for all private fuel. Partial payments don’t remove it.
Van benefit
- A van benefit of £4,170 applies if a van is available for private use.
- A fuel benefit of £798 applies if employer-paid private fuel is provided.
- No charge applies if a restricted private use condition is met each year.
Mileage allowance payments
Employers can pay employees who use their own vehicle for work a tax-free mileage allowance up to HMRC’s approved rates without reporting them. If an employee receives less, they can claim tax relief on the difference.
| Vehicle type | Pence per mile |
|---|---|
| Cars and vans: up to 10,000 miles | 55 |
| Cars and vans: over 10,000 miles | 25 |
| Bicycles | 20 |
| Motorcycles | 24 |
Who qualifies
- Company cars: employees and directors offered a company car by their employer.
- Mileage allowances: employees and directors using their own car for business journeys. Commuting to a regular workplace doesn’t qualify.
- Self-employed people don’t receive car benefits through PAYE but can claim business mileage as an expense.
Frequently Asked Questions
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How Is the Company Car Benefit Calculated?
A company car available for both business and private use creates a taxable benefit in kind for the employee. The benefit is worked out by multiplying the car’s list price, including fitted accessories, by a percentage based on its CO₂ emissions. If the employee makes a capital contribution towards the car, it can reduce the list price used in the calculation, up to a maximum of £5,000.
Is There an Extra Charge for Diesel Company Cars?
Yes, diesel cars attract a 4% supplement on top of the normal CO₂-based percentage, which increases the taxable benefit. The supplement does not apply if the car meets the Euro 6d emissions standard. Whatever the car type, the overall percentage used to calculate the benefit is capped at a maximum of 37%.
How are Electric and Hybrid Company Cars Taxed?
Fully electric cars with zero emissions are taxed at a low rate of 4% of the car’s list price for 2026/27. Plug-in hybrids with emissions of 1 to 50 g/km are taxed between 4% and 16%, depending on how far the car can travel on electric power alone. A longer electric range means a lower percentage, so choosing the right model can significantly reduce the tax cost.
What is the Car Fuel Benefit?
If your employer pays for fuel that you use for private journeys in a company car, this creates a separate taxable benefit. It is calculated by multiplying the car benefit percentage by the statutory fuel figure of £29,200. The charge is reduced if private fuel stops part-way through the year, and it only falls to nil if you pay for all your private fuel yourself.
What are the Approved Mileage Allowance Rates?
Employers can pay tax-free mileage allowances up to HMRC’s approved rates when employees use their own vehicle for business journeys. For cars and vans, the rate is 55p per mile for the first 10,000 miles and 25p per mile after that. Bicycles are 20p per mile and motorcycles are 24p per mile, and employees paid less than these rates can claim tax relief on the difference.
Does Commuting to Work Qualify for a Mileage Allowance?
No, travelling from home to your regular workplace is classed as commuting, so it does not qualify for tax-free mileage allowance payments. Mileage allowances only apply to genuine business journeys made in your own car, such as visiting clients or travelling to a temporary workplace. Employers and employees should keep accurate mileage records to show which journeys were for business.
Can Self-Employed People Claim Car Costs?
Self-employed people do not receive car benefits through PAYE, because those rules only apply to employees and directors. However, they can still claim their business mileage as an allowable expense when working out their taxable profits. Only journeys made for business purposes can be claimed, so private and commuting trips should be kept separate in your records.
What is the Van Benefit?
A van benefit of £4,170 applies if a company van is available to an employee for private use. If the employer also pays for private fuel, an additional fuel benefit of £798 applies on top. No charge arises if the van meets a restricted private use condition each year, so it is important to keep clear records.