Your company car seemed like a brilliant perk when you signed up. Free vehicle, minimal costs, excellent tax benefits—what’s not to love? Then April 2026 arrives, and your monthly tax bill jumps from £53 to £80. That’s an extra £324 annually, and you’re one of the lucky ones. Colleagues with higher-emission vehicles face increases of £500-£1,200 per year as Benefit-in-Kind rates undergo their most significant shake-up in years.
The company car tax landscape is transforming dramatically from 6 April 2026, with EV Benefit-in-Kind tax rising from 3% to 4% whilst BiK rates continue to increase with CO₂ emissions, reaching a maximum of 37% for higher-emission vehicles. For the 900,000+ UK employees with company cars, these changes create immediate financial implications that demand strategic decision-making before the April deadline.
Understanding the April 2026 BiK Changes: The Numbers That Matter
Benefit-in-Kind tax represents the amount employees pay for the “benefit” of personal use of company-provided vehicles. From 6 April 2026, the calculation remains the same—(P11D Value) × (BiK Percentage Rate) × (Your Income Tax Rate)—but the percentages increase significantly across almost every vehicle category.
For electric vehicles, the BiK rate for a fully electric vehicle will be 4% for the 2026/27 tax year, creating substantial but still manageable costs. A £40,000 electric car would have a taxable value of £1,600 (£40,000 × 4%). If you’re a 20% taxpayer, you’re looking at a yearly bill of £320. That works out to just under £27 a month, still remarkably competitive compared to combustion engine alternatives.
However, petrol and diesel vehicles face dramatically different economics. While the electric car BiK rate for company car tax 2026 sits at 4%, a thirsty petrol or diesel model could have a rate as high as 37%. That same £40,000 P11D value on a high-emission vehicle creates a taxable benefit of £14,800, generating £5,920 annual tax for a 40% taxpayer—that’s £493 monthly just for the company car benefit.
The mathematical reality proves stark. A company car driver with £40,000 EV paying 4% BiK (2026-27) at 40% income tax rate faces £640 annual tax liability (£40,000 × 4% × 40%), compared to £1,440-£5,920 for combustion equivalents at 9-37% BiK rates. The £800-£5,280 annual savings create powerful incentives for reconsidering vehicle choices.
Plug-in hybrids occupy increasingly uncomfortable middle ground. With Euro 6e-bis emissions testing arriving April 2026, many PHEVs will show dramatically higher official CO₂ figures despite the vehicles themselves remaining unchanged. This technical recalibration pushes plug-in hybrids into higher tax bands, eroding their previous advantages over pure combustion engines whilst remaining significantly more expensive than full EVs.
The Hidden Escalator: 2027, 2028, and Beyond
The April 2026 changes represent just one step in a multi-year escalation designed to gradually equalise EV taxation with combustion alternatives. Company car Benefit-in-Kind tax rates for electric vehicles rise to 4% from 6 April 2026 (2026-27 tax year), up from 3% in 2025-26, with scheduled increases to 5% (2027-28) and eventually stabilising around 9-12% by 2030.
This creates predictable trajectories enabling long-term planning, but the compound effect proves substantial. An EV company car driver paying £640 in 2026/27 will face £800 in 2027/28 (5% BiK) and potentially £1,440-1,920 by 2030 (9-12% BiK). Over five years, the total tax burden increases 125-200%, transforming what seemed like a tax-efficient benefit into a significant expense.
The 2028 wildcard adds another layer of complexity. From April 2028, the UK Government will introduce a mileage-based charge on electric and plug-in hybrid cars. Under the new scheme fully electric cars will attract a levy of approximately 3p per mile travelled, while plug-in hybrids will be charged around 1.5p per mile. For typical company car drivers covering 10,000-15,000 business and personal miles annually, this adds £300-450 in annual charges on top of BiK tax.
The combined impact creates genuinely expensive scenarios. A 40% taxpayer with a £45,000 EV driving 12,000 miles annually will face approximately £720 BiK tax (4% rate in 2026/27) plus £360 mileage charges (from 2028), totalling £1,080 annually. By 2030, with BiK at potentially 10%, the same driver faces £1,800 BiK plus £360 mileage tax—£2,160 total, or £180 monthly just for company car taxation.
Company Car vs Cash Allowance: The 2026 Calculation
Many employers offer alternatives to company cars including cash allowances typically ranging from £4,000-£8,000 annually depending on seniority. The April 2026 changes make this decision more nuanced than ever, requiring careful calculation of total costs versus benefits.
The cash allowance appears superficially attractive—£6,000 annually provides genuine money you can deploy flexibly. However, cash allowances are fully taxable as income. A £6,000 allowance for a 40% taxpayer generates £2,400 tax and approximately £720 National Insurance, leaving £2,880 net annual benefit or £240 monthly.
Compare this to company car scenarios. The £640 annual tax on that £40,000 EV (4% BiK, 40% taxpayer) costs significantly less than the tax on equivalent cash allowance, whilst providing a vehicle worth far more than the net cash received. However, you must also consider insurance, fuel (if not provided), and the restriction to one specific vehicle rather than flexibility to choose your own.
For high-emission company cars, the equation flips entirely. £5,920 annual BiK tax on a £40,000 high-emission vehicle (37% BiK, 40% taxpayer) makes the cash allowance dramatically more attractive. Even after tax and NI, £2,880 net from £6,000 allowance proves cheaper than £5,920 company car tax, plus you gain vehicle choice flexibility.
The optimal decision depends on multiple factors: your tax bracket (higher earners face worse company car economics), your vehicle’s BiK rate (EVs remain attractive, high-emission cars become toxic), whether employer provides fuel (significant additional benefit if provided), your annual mileage (high mileage makes personal ownership expensive), and your need for vehicle flexibility (company cars lock you into one choice).
For many higher-rate taxpayers with high-emission company cars, the April 2026 changes create tipping points where cash allowances become financially superior. This transformation opens strategic opportunities for those with personal vehicles they no longer need.
The Smart Strategy: Selling Your Personal Car When Company Car Makes Sense
If BiK calculations favour keeping your company car despite the April 2026 increases, the logical corollary involves reassessing whether you need a personal vehicle too. Many households maintain both company and personal cars, creating unnecessary costs when one vehicle could serve all needs.
The economics prove compelling when examined honestly. A personal car sitting on your driveway generates insurance costs of £400-£1,000+ annually, road tax of £200-760 depending on emissions, servicing and MOT of £300-600 yearly, and depreciation of £800-2,000 annually on average vehicles. Tot up these costs and you’re spending £1,700-4,360 annually on a vehicle you might barely use if your company car handles most driving.
Company car rules typically allow personal use including commuting, shopping, leisure, and family transport. The BiK tax you’re already paying covers this personal use. Maintaining a separate personal vehicle duplicates functionality whilst consuming resources that could be deployed more productively.
Selling your personal vehicle eliminates all ownership costs immediately whilst converting the vehicle’s value into usable cash. Whether that’s £3,000 for an older family car or £12,000 for a newer model, this capital can reduce debts, fund savings, or improve quality of life rather than sitting depreciating on your driveway.
The timing considerations matter too. Vehicle values face multiple pressures in 2026 including EV transition dynamics depressing petrol car values, 2026 VED increases affecting older vehicles, insurance cost spikes making ownership expensive, and increased running costs from potential fuel duty changes. Selling sooner rather than later protects value before these factors accelerate depreciation.
For families genuinely needing two vehicles—perhaps both adults commute in different directions or have genuinely separate transport needs—the calculation differs. However, many two-car households discover that honest assessment reveals one vehicle covers 90%+ of actual needs, with the second providing marginal convenience that doesn’t justify thousands in annual costs.
When Company Cars Stop Making Sense: Exit Strategies
Not everyone benefits from company cars post-April 2026. High earners with high-emission vehicles face particularly brutal tax implications that might justify exiting schemes entirely. Understanding your options enables informed decisions rather than passively accepting deteriorating economics.
The simplest exit involves returning the company car and taking cash allowance if offered. This immediately eliminates BiK tax whilst providing cash you control. You’ll need replacement transport, but the after-tax cash allowance plus money saved from BiK elimination often funds personal vehicle purchase or lease whilst leaving you better off overall.
Some employers structure voluntary opt-outs where you can exit company car schemes during specific windows. April 2026 represents an ideal opportunity to request opt-out if your employer permits, as the changes create justifiable reasons for reconsidering arrangements. Frame the conversation around personal financial optimization rather than dissatisfaction with the employer.
Alternative transport strategies might suit specific situations. If you live in well-connected urban areas with excellent public transport, eliminating both company car and personal vehicle in favor of season tickets plus occasional car hire could prove most economical. The total cost of travel decreases whilst you gain flexibility without vehicle ownership burdens.
For higher earners, purchasing vehicles personally and claiming mileage for business use sometimes proves more tax-efficient than company cars, particularly with high-emission vehicles facing 37% BiK. The 45p per mile HMRC-approved rate for the first 10,000 business miles (25p thereafter) can generate significant tax-free income whilst you drive your own vehicle rather than one chosen by your employer.
Electric vehicle salary sacrifice schemes offer another alternative worth exploring. These enable employees to lease EVs through salary sacrifice, enjoying pre-tax and National Insurance savings. With EV BiK at only 4% in 2026/27, salary sacrifice schemes remain highly tax-efficient even after April’s changes, potentially providing better economics than traditional company cars whilst giving you more vehicle choice.
How Professional Buyers Help Company Car Drivers
If you’ve decided selling your personal car makes sense given your company car situation, working with professional buyers streamlines what could otherwise become complicated transactions. Sell My Car Today specialises in quick, transparent purchases that eliminate private sale hassles whilst securing fair prices.
The instant 30-second valuation provides realistic market pricing for your personal vehicle, enabling informed decisions about whether selling makes financial sense. You receive honest offers reflecting genuine trade values rather than inflated quotes that crash during collection.
Free nationwide collection proves particularly valuable for busy company car drivers with limited time. You’re not coordinating test drives with strangers, managing classified listings, or taking time off work for viewings. Professional collection teams handle everything, arriving at your convenience and managing all logistics regardless of your vehicle’s condition.
Same-day payment provides immediate financial certainty. Rather than waiting weeks for private buyers to arrange finance or bank transfers to clear, you receive funds within hours of collection. This rapid completion enables immediate deployment of proceeds toward debt reduction, savings, or other financial priorities.
Zero hidden fees mean the quoted price matches your payment exactly. There are no deductions for age, mileage, or other factors beyond those disclosed upfront. This transparency allows accurate comparison against private sale alternatives where advertising costs, time investment, and negotiation often erode apparent value advantages.
For vehicles with outstanding finance, professional buyers coordinate settlements directly with lenders, paying finance companies from sale proceeds whilst you cover only any negative equity difference. This eliminates the complexity of managing multiple parties whilst ensuring clean title transfer and proper DVLA notifications.
Real-World Company Car Scenarios: What the Numbers Really Mean
Abstract percentages and policy descriptions mean little without understanding their actual impact on real people in recognizable situations. These scenarios illustrate how April 2026 changes affect different company car drivers.
Sarah, 40% Taxpayer, £35,000 EV: Sarah’s Tesla Model 3 has a P11D value of £35,000. At 3% BiK in 2025/26, she paid £420 annually (£35,000 × 3% × 40%). From April 2026 at 4% BiK, she’ll pay £560 annually—a £140 increase or £11.67 monthly. This remains manageable and still significantly cheaper than combustion alternatives. Sarah’s decision: keep the company car, sell her personal Volkswagen Golf generating £8,500 cash whilst eliminating £2,200 annual personal car costs.
James, 40% Taxpayer, £42,000 Diesel SUV: James’s Range Rover Sport diesel emits 187g/km, placing it in the 36% BiK band for 2026/27. His annual tax is £6,048 (£42,000 × 36% × 40%), up from £5,880 in 2025/26 (35% BiK). At £504 monthly just for BiK tax, James decides to exit the company car scheme, take his £7,000 cash allowance, and purchase a used vehicle personally. After tax and NI, he nets £3,920 from the allowance—less than his BiK tax, so exiting proves financially beneficial.
Michael, 20% Taxpayer, £28,000 Plug-In Hybrid: Michael’s PHEV currently enjoys 14% BiK based on 40-mile electric range. Euro 6e-bis testing pushes his official CO₂ from 45g/km to 78g/km, moving him from the 14% band to potentially 21% from April 2026. His tax increases from £784 annually (£28,000 × 14% × 20%) to £1,176 (£28,000 × 21% × 20%)—a £392 jump or £32.67 monthly. Michael keeps the company car as it still provides value, but sells his wife’s rarely-used personal car saving £1,800 annually in running costs.
Emma, 20% Taxpayer, £25,000 Small Petrol Car: Emma’s Volkswagen Polo emits 118g/km, placing it in the 28% BiK band for 2026/27. Her annual tax is £1,400 (£25,000 × 28% × 20%), or £116.67 monthly. Her employer offers £4,000 cash allowance alternative. After 20% tax and NI, Emma nets approximately £2,240 from the allowance versus £1,400 company car tax. The company car still provides better value as £2,240 wouldn’t fund a comparable vehicle. Emma keeps the company car and continues using it for all transport needs.
Taking Action: Your April 2026 Decision Timeline
The April 2026 deadline creates specific timeframes for optimal decision-making. Acting strategically now protects your interests better than reactive responses after changes implement.
February-March 2026 (Now): Calculate your exact 2026/27 BiK tax using your vehicle’s P11D value, BiK percentage, and personal tax rate. Compare this to cash allowance alternatives if offered. Assess whether you need personal vehicle if company car handles most transport. Get valuations for any personal vehicles you’re considering selling, including from Sell My Car Today.
March 2026: If selling personal vehicle makes sense, complete sales before April to avoid any potential value impacts from spring market dynamics. This timing also provides clean financial planning entering the new tax year. If exiting company car schemes, submit requests to employers during March to ensure April processing if schemes permit mid-year changes.
April 2026: New BiK rates implement automatically through PAYE. Review your first payslip under new rates confirming expected tax deductions. If company car costs exceed expectations, revisit calculations and consider whether delayed exits remain viable. Financial situations change, and flexibility matters more than stubbornly sticking to previous decisions if circumstances shift.
May-June 2026: For those keeping company cars, reassess total transport costs including BiK tax, any fuel contributions, and running costs of personal vehicles if retained. The cumulative impact becomes clear across several payslips, enabling honest evaluation of whether arrangements remain optimal. If retaining personal vehicles no longer makes sense, spring represents excellent selling season for maximizing values.
Why Sellmycartoday.uk Understands Company Car Drivers’ Needs
Company car drivers face unique situations when selling personal vehicles, requiring services that accommodate busy schedules and provide transparent, efficient transactions. Sell My Car Today delivers exactly this combination.
The instant 30-second valuation fits seamlessly into busy professional schedules, providing accurate pricing without lengthy appointments or coordinating multiple dealers. You can obtain valuations during lunch breaks, evenings, or weekends—whenever suits your calendar rather than dealer operating hours.
Free nationwide collection eliminates the logistics complications that busy professionals struggle managing. Whether your personal vehicle sits at home, workplace parking, or elsewhere, collection teams coordinate around your schedule. You’re not taking time off work, arranging transport, or managing the hassle typical of private sales where you’re showing vehicles to strangers at inconvenient times.
Same-day payment ensures rapid access to proceeds. Whether deploying funds to reduce debts, boost savings, or fund other priorities, you’re not waiting weeks for private buyers to arrange finance or negotiate complicated payment terms. The financial certainty enables immediate planning rather than extended uncertainty.
Zero hidden fees combined with transparent pricing creates trust that professional services operate honestly. You’re not discovering surprise deductions at collection or facing revised offers based on spurious “discoveries” of problems you’d disclosed upfront. The quote you receive matches the payment you get, enabling accurate financial planning.
The proven track record across thousands of satisfied customers demonstrates consistent service delivery. Real company car drivers report smooth transactions that eliminated stress from situations they expected would be complicated. Professional, courteous service combined with market-leading efficiency creates experiences that exceed expectations rather than creating disappointments.
Frequently Asked Questions About Company Car Tax 2026
How much will my company car tax increase in April 2026?
The increase depends on your vehicle’s fuel type and emissions. Electric vehicles see BiK rates rise from 3% to 4%, creating modest increases of £100-200 annually for most EV company car drivers. Petrol and diesel vehicles face BiK rates from 14% to 37% depending on CO₂ emissions, with some higher-emission vehicles seeing £500-1,200 annual increases. Calculate your specific impact using: (P11D Value) × (New BiK %) × (Your Tax Rate) minus your current year calculation. A 40% taxpayer with a £40,000 EV faces £640 annually from April 2026 versus £480 in 2025/26—a £160 increase.
Can I exit my company car scheme before April 2026?
This depends entirely on your employer’s policies. Some companies allow voluntary opt-outs during specific windows, whilst others require completing minimum terms. Contact your HR department immediately to understand your options. If exit is permitted, March 2026 represents the optimal timing to avoid the April BiK increases. Even if you can’t exit immediately, understanding your employer’s policies enables planning for future changes. Some drivers negotiate switches to cash allowances, providing more financial flexibility whilst eliminating BiK tax entirely.
Is taking cash allowance better than keeping my company car?
This requires individual calculation based on multiple factors. Cash allowances are fully taxable as income. A £6,000 allowance for a 40% taxpayer generates £2,400 tax and £720 NI, leaving £2,880 net. Compare this to your company car BiK tax. If your BiK exceeds £2,880, cash allowance saves money. However, consider what replacement transport costs using that net cash—you might still need a vehicle. Low BiK vehicles (especially EVs) often remain better value than cash allowances despite the April increases, whilst high-emission vehicles increasingly favour cash alternatives.
Will the 2028 pay-per-mile tax make company EVs unaffordable?
Not unaffordable, but certainly more expensive. From April 2028, fully electric cars will attract a levy of approximately 3p per mile travelled. For drivers covering 10,000 miles annually, this adds £300 to BiK tax costs. By 2028, EV BiK will be 5%, creating £800 annual tax on a £40,000 vehicle for 40% taxpayers. Adding £300 mileage charges totals £1,100 annually—still far cheaper than high-emission combustion equivalents facing £5,000-6,000 combined BiK costs. EVs remain most tax-efficient choice, just less dramatically so than current rates.
Should I sell my personal car if I have a company car?
If your company car handles most of your driving needs, selling your personal vehicle makes strong financial sense. Personal cars generate insurance (£400-1,000), road tax (£200-760), servicing (£300-600), and depreciation (£800-2,000) totalling £1,700-4,360 annually. This money could reduce debts, boost savings, or improve quality of life. The BiK tax you pay already covers personal use of your company car including commuting, shopping, and leisure. Unless you genuinely need two vehicles for specific circumstances, maintaining both duplicates functionality whilst consuming unnecessary resources.
How do I calculate my exact BiK tax for 2026/27?
Use this formula: (P11D Value) × (BiK Percentage) × (Your Income Tax Rate) = Annual BiK Tax. Find your P11D value on your P11D form or ask your employer. Determine your BiK percentage from HMRC tables based on CO₂ emissions—EVs are 4% in 2026/27, whilst petrol/diesel ranges from 14% to 37%. Your income tax rate is typically 20%, 40%, or 45%. Example: £35,000 EV × 4% × 40% = £560 annually. Divide by 12 for monthly cost (£46.67 in this example). Online calculators exist, but understanding the manual calculation ensures accuracy.
What happens to plug-in hybrid BiK rates in April 2026?
PHEVs face significant challenges due to Euro 6e-bis emissions testing changing their official CO₂ figures dramatically upward despite the vehicles themselves remaining unchanged. Many PHEVs will move into higher BiK bands, eroding their previous tax advantages. A PHEV previously enjoying 14% BiK might jump to 21% or higher, creating £500-1,500 annual tax increases for many drivers. This technical recalibration makes pure EVs increasingly attractive compared to plug-in hybrids, accelerating the shift toward full electrification in company car fleets.
Can Sell My Car Today buy my personal car quickly before April?
Yes, Sell My Car Today completes purchases within 24-48 hours from initial valuation through to final payment. The instant 30-second valuation provides immediate pricing. If you accept, collection schedules at your convenience with same-day payment following collection. This rapid timeline ensures completion before April’s changes if that timing matters for your financial planning. Free nationwide collection handles all logistics regardless of vehicle location or condition, eliminating any complications that might slow traditional sales. Thousands of company car drivers have used this service to simplify their transport arrangements.
Do company car drivers pay road tax separately?
No, company car drivers don’t pay Vehicle Excise Duty (road tax) separately—this is typically covered by the employer as part of providing the vehicle. However, VED does factor into employer costs and influences which vehicles they offer in company car schemes. The BiK tax you pay through PAYE is completely separate from VED and represents tax on the benefit of personal use, not the vehicle’s road licensing. This remains true regardless of the April 2026 changes, which affect BiK percentages but don’t alter the fundamental structure of who pays VED.
Should I wait until after April to sell my personal car?
No, selling before April generally makes more sense for several reasons. Spring represents strong selling season with higher demand and better values compared to winter months. The April BiK changes might prompt others to make similar decisions, potentially increasing supply of personal vehicles on the market and suppressing prices slightly. Getting your instant valuation now provides certainty before any market dynamics shift. Additionally, selling in March allows clean financial planning entering the new tax year. Professional buyers like Sell My Car Today offer consistent pricing year-round, making timing less critical than with seasonal private sales, but earlier typically proves better than later when selling vehicles.
Take Control of Your Company Car Costs
The April 2026 BiK changes don’t have to create financial crisis or passive acceptance of deteriorating economics. Understanding the numbers, calculating your personal impact, and making strategic decisions transforms this regulatory change into opportunity rather than burden.
For those keeping company cars despite increases, reassessing whether personal vehicles remain necessary creates potential for substantial savings whilst simplifying transport arrangements. For drivers facing prohibitive BiK increases on high-emission vehicles, exploring cash allowances or alternative arrangements might restore financial sense to employment benefits that have become expensive liabilities.
Get your free instant valuation now to understand exactly what your personal vehicle is worth. Whether you’re certain about selling or simply exploring options, accurate pricing enables informed decisions rather than guessing about financial implications.
The April deadline approaches rapidly, but time remains to act strategically rather than reactively. Every day of delay means another day of carrying unnecessary costs or missing opportunities to optimize your transport economics before regulatory changes implement.
Your company car situation might have shifted from benefit to burden, or perhaps it remains excellent value despite modest tax increases. Either way, taking control through informed decision-making protects your financial interests far better than passively accepting whatever outcomes emerge from regulatory changes you can’t influence.
The April 2026 company car tax changes are unavoidable. How you respond remains entirely within your control.