Company cars · UK guidance
How do electric company cars and salary sacrifice work?
A fully electric company car has a 4% benefit-in-kind rate in 2026/27. Your income tax normally depends on the car's taxable value and your tax rate. Salary sacrifice also changes your salary and benefits, so the car tax alone does not tell you the scheme's total cost.
Understand the car benefit first
For a simple full-year example, a £40,000 P11D value at 4% produces a £1,600 taxable benefit. At a 40% marginal tax rate, that is £640 a year, or about £53.33 a month. Contributions, band changes and other adjustments can change your calculation.
Salary sacrifice is a separate calculation
Under salary sacrifice you agree to give up some cash salary for a benefit. Ask payroll for the effect on your take-home pay, pension basis, statutory pay and any salary-linked benefits. Minimum wage rules apply. Do not compare a gross salary deduction directly with an after-tax private lease payment.
Ask for these points in writing
Use this as a comparison checklist for any employer scheme.
- Net monthly cost, with the tax year and assumptions stated.
- What is included: insurance, tyres, servicing and breakdown cover.
- Annual mileage, excess-mileage cost and damage charges.
- Terms if you resign, are made redundant or take extended leave.
- Delivery timing, charging costs and what happens as tax rates change.
Business mileage
HMRC's advisory fuel and electric rates are for employees using company cars in specified circumstances. They are reviewed quarterly. Check the current official home/public charging rules and your employer's policy; do not assume they are the same as reimbursement for your own car.
Sources and checks
Source information checked on 24 September 2026. Schemes, prices and rules can change. Practical checklists are our guidance, not official eligibility decisions.