Why is salary sacrifice on Electric Vehicles (EVs) so tax-efficient?

Pure zero-emission company cars have a 4% appropriate percentage for 2026/27. A company car provided through salary sacrifice is still taxed using the car benefit rules; the amount of Income Tax and National Insurance saved on sacrificed salary depends on your earnings and circumstances. The calculator uses a simplified rate-based estimate and does not model every payroll effect.

What is a car's P11D value?

The P11D value is the official manufacturer list price of the car (including VAT and factory options), plus delivery charges, but excluding the first-year vehicle excise duty (VED/road tax) and first registration fee. HMRC uses the P11D value as the baseline to calculate all company car BIK charges.

Can company car salary sacrifice reduce pay below Minimum Wage?

Salary sacrifice must not reduce pay below the applicable National Minimum Wage for hours worked. Employers must check the arrangement against the employee's age, hours and pay period; the calculator does not check this limit.

How does company car tax affect my tax code?

Your employer can report a car benefit on form P11D or payroll it through PAYE. If it is not payrolled, HMRC may adjust your tax code to collect the tax. The timing and amount of deductions depend on your tax code and payroll.

How are electric car charging costs treated for tax purposes?

Workplace charging provided by an employer for an employee's electric car is generally exempt from a separate benefit charge if the statutory conditions are met. Mileage reimbursements have specific rules and rates; check HMRC guidance for your circumstances.

Statutory 2026/27 BIK & Salary Packaging Modeler

Company Car Tax Calculator UK

Estimate company car BIK tax and salary sacrifice impact. Pure zero-emission cars have a 4% BIK rate in 2026/27; other vehicles need their own official rate.

By AfterTaxUK Editorial TeamITEPA 2003 Sections 114–172Official 4% Pure EV Rate (2026/27)

Company Car & BIK Engine 2026/27

Car Details & Salary Sacrifice Terms

Pure EV 4% BIK (2026/27)

Vehicle P11D Value (£)

Vehicle BIK Rate

Gross Lease Deduction (£/mo)

Your Income Tax Band

Pure electric car rate: Zero-emission company cars have a 4% BIK rate for 2026/27. The salary sacrifice estimate depends on your tax band, earnings, employer scheme and lease terms.

Estimate only: assumes the selected Income Tax and NI rates apply to the full salary sacrifice. Actual savings depend on earnings, payroll, pension, student loan and employer scheme terms. It does not compare lease inclusions or private finance costs.

Indicative Monthly Cost Estimate

£372.33/ month out of pocket

Net difference from gross sacrifice£177.67/mo

Gross Sacrifice£550.00/mo£6,600.00/yr

Tax & NI Relief-£231.00/mo£2,772.00/yr saved

BIK Company Car Tax+£53.33/mo4.0% BIK (£1,600.00 value)

Estimated reduction32% differenceestimate only

Author: AfterTaxUK Editorial Team • Tax Year: 2026/27 • Published: 6 April 2026

ITEPA 2003 & OpRA Section 69A Compliant

How Company Car Benefit-in-Kind (BIK) Is Calculated

When an employee is provided with a company car available for private journeys (including everyday commuting), HM Revenue & Customs classifies this perk as taxable employment earnings under Sections 114–172 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003).

The statutory BIK calculation follows a strictly prescribed two-step mathematical formula:

Step 1: Taxable BIK Value = Vehicle P11D Value × Statutory BIK Percentage (determined by CO2 emissions).

Step 2: Annual BIK Tax Payable = Taxable BIK Value × Your Marginal Income Tax Rate (20%, 40%, or 45%).

Employee Class 1 National Insurance is not charged on the car benefit itself. Employers may owe Class 1A National Insurance on taxable benefits; the applicable employer rate can change and is not included in this estimate.

2026/27 Pure EV Rate and How to Estimate Other Cars

The appropriate percentage for a zero-emission company car is 4% in 2026/27. For example, a pure EV with a £45,000 P11D value has a £1,800 taxable benefit. At a 40% Income Tax rate, the illustrative tax on that benefit is £720 a year (£60 a month).

Petrol, diesel and plug-in hybrid rates are not a single rate by fuel type. They depend on the car's CO2 emissions and, for some hybrids, its electric-only range. Choose the manual rate option above and enter the percentage shown for your specific car by HMRC or your employer. See the HMRC 2026/27 company car rate guidance.

EV Salary Sacrifice Schemes & OpRA Exemption (Sec 69A)

In April 2017, the UK Government introduced Optional Remuneration Arrangements (OpRA) legislation under Section 69A of ITEPA 2003 to crack down on salary sacrifice tax advantages. For most perks (such as gym memberships or mobile phones), employees are taxed on the higher of the salary given up or the benefit value.

However, Parliament created a statutory exemption for ultra-low emission vehicles (ULEVs emitting 75g/km CO2 or less). When an employee sacrifices gross contractual salary for an electric car lease:

Pre-Tax Lease Savings

A salary sacrifice can reduce taxable pay and National Insurance pay, but the actual effect depends on earnings, pension and benefit calculations, and employer scheme terms. Compare the employer quote with the private alternative, including what each price covers.

4% Pure EV BIK Rate

For a £45,000 P11D value, a 4% BIK percentage gives a £1,800 taxable benefit. The Income Tax due depends on your tax rate; this is separate from the sacrificed lease amount.

The calculator gives an illustration only. Salary sacrifice savings vary by employee, tax year and employer scheme; check the written quote and impact on pensionable pay and other benefits.

National Minimum Wage Floor Rule:Under the National Minimum Wage Act 1998, an employer cannot permit a salary sacrifice arrangement to reduce an employee's cash earnings below the statutory National Living Wage rate.

Company Car Tax FAQs (2026/27)

Frequently asked questions about P11D values, EV salary sacrifice, and Benefit-in-Kind payroll deductions.

When an employer provides a company car or salary sacrifice vehicle for private use, HMRC treats this as a non-cash taxable perk called a Benefit-in-Kind (BIK) under Section 120 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003). BIK tax is calculated by multiplying the vehicle's official P11D list price by a statutory percentage based on its CO2 emissions, and then multiplying that taxable value by your personal Income Tax band (20%, 40%, or 45%).

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Benefit in kind differs from a cash deduction

Company-car tax uses the applicable list price, emissions category, appropriate percentage and personal tax treatment. A lease payment or employer cost is a different figure.

A salary-sacrifice comparison also depends on employer scheme terms, pension and minimum-wage constraints. Confirm the car specification and benefit rate rather than assuming every vehicle qualifies for an EV rate.

Check the rules for your circumstances

Official guidance supports the rules described here; it does not approve or certify this calculator. Confirm dates, eligibility and unsupported cases before making a financial decision.