Updated October 2025 | Reading time: 9 minutes
Company car tax can look complex — but it boils down to a few key inputs: your car’s P11D value, its WLTP CO₂ emissions, and the government’s Benefit-in-Kind (BIK) bands. This guide explains each one in plain English, then shows why electric cars (and many PHEVs) are usually the most tax-efficient choices in 2025.
Need one-to-one advice? Speak to our team and we’ll run a personalised calculation for you.
Benefit-in-Kind (BIK) is a tax employees pay when they’re provided with a car for personal use (any non-business mileage, including commuting). Your BIK amount is based on:
Result: P11D value × BIK % = Taxable Benefit. You then pay income tax on that amount at your marginal rate.
P11D is essentially the list price including factory options and VAT. It is not the monthly lease cost. Choosing sensible specs can reduce P11D and your annual BIK bill.
Want help structuring specs to keep P11D sensible? Ask our advisors.
Every car has a WLTP CO₂ figure. HM Treasury sets BIK % bands by CO₂ and fuel type. EVs sit in the lowest bands; efficient PHEVs are typically lower than equivalent petrol/diesel models. The BIK % is then applied to the P11D value to calculate your taxable benefit.
Note: BIK bands and thresholds are set by government and can change. Always check the latest guidance before ordering.
New to electrification? Start with Electric Cars Explained.
Here’s how the moving parts fit together in principle:
Ask us to run the exact numbers for your chosen car and tax band.
Salary sacrifice leasing lets employees exchange part of their gross salary for a new car (often an EV) — typically unlocking significant savings vs a like-for-like personal lease because you pay BIK instead of income tax/NI on the full amount.
Employers can launch a scheme quickly with our help.
Leasing doesn’t change BIK directly — it changes your total monthly cost (fixed rentals, optional maintenance, no depreciation risk). Combine a tax-efficient EV with a sharp lease and you can materially reduce your motoring outgoings.
Your car’s P11D value, WLTP CO₂ emissions (which set the BIK %), fuel type, and your personal income tax band.
EVs are typically in the lowest BIK bands compared with petrol/diesel, which can significantly reduce your company car tax.
They’re assessed using CO₂ and electric-only range — models with greater EV range generally attract lower BIK than comparable ICE models.
Yes. With salary sacrifice you swap gross salary for a car deduction and pay BIK instead — often delivering strong savings on EVs.
They can. Always check the current year’s bands before ordering; we’ll confirm the latest rules as part of your quote.
Understand P11D, match CO₂/BIK bands to your usage, and consider EVs or efficient PHEVs for the best tax outcomes. Pair that with a competitive lease and you’ll optimise both your monthly cost and tax position.
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