Tax year: 2026/27 | Last reviewed: 2 October 2026
Choosing a company car is now mainly a tax decision. The gap between a fully electric car, a plug-in hybrid and a petrol car is large, and it depends on details such as electric range and whether the company buys or leases. Here is how the options compare for 2026/27.
How company car tax is worked out
The taxable benefit is the car’s list price (including options) multiplied by the appropriate percentage, which is based on CO2 emissions and, for hybrids, electric range. The driver pays income tax at their marginal rate on that benefit, and the company pays 15% Class 1A NI.
2026/27 benefit in kind percentages
| Car type | CO2 / electric range | BIK % |
|---|---|---|
| Fully electric | 0g/km | 4% |
| Plug-in hybrid | 1-50g/km, range 130+ miles | 4% |
| Plug-in hybrid | 1-50g/km, range 70-129 miles | 7% |
| Plug-in hybrid | 1-50g/km, range 40-69 miles | 10% |
| Plug-in hybrid | 1-50g/km, range 30-39 miles | 14% |
| Plug-in hybrid | 1-50g/km, range under 30 miles | 16% |
| Typical petrol | 130-150g/km | around 30-34% |
Diesels that do not meet the RDE2 standard pay a further 4% supplement, capped at 37%. Most plug-in hybrids sit in the 40-69 mile band, so 10% is the usual starting point. A longer-range hybrid can be dramatically cheaper than one that just misses a band.
Example: £45,000 car, higher rate taxpayer
- Electric (4%): benefit £1,800, tax £720 a year
- Plug-in hybrid, 45 mile range (10%): benefit £4,500, tax £1,800 a year
- Petrol at 32%: benefit £14,400, tax £5,760 a year
The company’s Class 1A NI follows the same pattern: £270, £675 and £2,160.
Capital allowances and leasing
- New electric cars qualify for a 100% first year allowance if bought by 31 March 2027 (corporation tax).
- Hybrids at 1-50g/km go into the main pool at 14% a year from April 2026.
- Cars over 50g/km go into the special rate pool at 6% a year.
- Leased cars over 50g/km have 15% of the lease rentals disallowed. Electric and low emission leases are fully deductible, with 50% of the VAT usually reclaimable.
Fuel and charging
A hybrid driver who has private fuel paid by the company faces a separate fuel benefit charge, which can easily wipe out the saving. For electric cars, there is no fuel benefit and workplace charging is tax-free. For mileage, HMRC’s advisory fuel and electricity rates let the company reimburse business journeys tax-free.
What is changing
EV rates rise by one or two percentage points a year to 9% in 2029/30. From 2028/29 hybrid bands are also being reshaped, so a long-range PHEV ordered today may not keep its current band for the whole lease. If the car will be with you for four years, budget on the later rates.
Our view
If an EV fits how you drive, it is almost always the most tax-efficient choice. A long-range plug-in hybrid is a good second best for high-mileage drivers. Petrol and diesel company cars rarely make sense now unless the list price is low. Read our electric company car guide for the purchase and FYA detail.
FAQs
Is a hybrid company car worth it?
Only if it has a long electric range and you charge it. A short-range hybrid driven on petrol is taxed far more than an EV.
Can I claim mileage in a company car?
Not the 55p rate. That is for your own car. For company cars, the company can reimburse fuel or electricity for business journeys at HMRC’s advisory rates. See our mileage allowance guide.
Talk it through with Digivolve
Choosing between models? Send us the list prices and emissions and we will compare the tax on each option for you and the company.
This article is general information based on the rules for the 2026/27 tax year as at October 2026. It is not personal tax advice. Rates and thresholds can change, so please speak to us before acting.