Company Car Tax in 2026/27: Key Things Business Owners Need to Know

What business owners and directors should know about company car tax, electric vehicles and fuel benefits in 2026/27.

If you’re a business owner or director thinking about buying a company car, understanding the tax implications has never been more important, especially with the continued push towards electric vehicles and changing Benefit in Kind (BIK) rates.

The good news is.. For many businesses, electric company cars can still be extremely tax efficient in 2026/27. However, for higher emission vehicles, the numbers often tell a very different story.

In our latest guide, we break down some of the key points business owners should know before purchasing, leasing or running a company car.

What Is Company Car Benefit in Kind (BIK)?

If your company provides a car that is available for private use (including commuting to and from work). It is treated as a taxable benefit in kind.

The taxable amount is based on:

The list price of the vehicle
The CO2 emissions of the car
The vehicle’s electric-only range (where applicable)

The lower the emissions, the lower the taxable benefit.

Electric Cars Continue to Offer Strong Tax Advantages

Fully electric vehicles remain one of the most tax-efficient options available to directors and employees.

For 2026/27:

Fully electric cars are taxed at just 4% BIK
Businesses can currently claim 100% first year tax relief on qualifying new electric cars
There is no fuel benefit charge for electric charging costs
Running costs such as insurance, servicing and maintenance can also be paid through the company

Although BIK percentages are gradually increasing over the coming years, electric vehicles can still provide substantial tax savings compared to petrol or diesel alternatives.

Beware of Fuel Benefit Charges

One of the biggest mistakes businesses make is allowing private fuel costs to be paid through the company.

If this happens, HMRC can apply a separate fuel benefit charge, and this can become surprisingly expensive.

In many cases, it is more tax efficient to:

Pay for private fuel personally
Reimburse the company for private mileage
Use HMRC advisory fuel rates instead

For personally owned vehicles used for business journeys, HMRC’s approved mileage rates may also be available.

Should You Buy the Car Personally or Through the Company?

There is no universal answer but it depends on factors such as:

The vehicle’s CO2 emissions
Business mileage
Whether the vehicle is electric
Your personal tax rate
Whether the car will be purchased or leased

Generally speaking:

Fully electric vehicles often work well through a limited company
Higher emission vehicles are frequently more tax efficient when owned personally

Careful planning can make a significant difference to the overall cost.

Leasing vs Buying a Company Car

Leasing can offer flexibility, but it is important to understand the tax treatment.

For example:

Cars with emissions above 50g/km face a 15% lease payment disallowance
VAT recovery restrictions apply where there is any private use
Different rules apply depending on whether it is an operating lease, HP or lease purchase agreement

Understanding the structure of the agreement is essential before committing.

Download the Full 2026/27 Company Car Guide

We’ve created a practical guide covering:

Company car tax rules
Benefit in Kind rates
Electric vehicle tax savings
Fuel benefit charges
Capital allowances
Leasing considerations
Mileage alternatives
Tax planning opportunities for directors

To access the guide go to: Resources > Downloads > Car Benefit 26/27

If you would like tailored advice on whether a company car is the right option for you or your business, our team would be happy to help.

Call us on 01932 485325
Email [email protected]

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