How much will the BIK increase on electric company cars cost me?
Car changing is a big deal
Electric company car Benefit-in-Kind (BiK) rates are rising to 4% from 6 April 2026. Here’s what the change means for your tax bill and monthly costs.
If you drive an electric company car, 2026 brings a small but noticeable change to your tax bill. From 6 April 2026, the start of the 2026/27 tax year, the Benefit-in-Kind (BiK) rate for electric cars increases from 3% to 4%. This means you’ll pay slightly more in company car tax than you did last year.
But what could you be expected to pay? Here’s a breakdown showing the potential increase in your tax bill.
Remember, you can lease a company car right here on Carwow. We’re here to help you through every step of your car-changing journey.
What is BiK and why does it matter?
BiK (Benefit-in-Kind) is the tax you pay when your employer gives you something you can use personally. A company car is a good example, but it’s also important to note that it also applies to cars you lease through salary sacrifice schemes.
For cars, the tax is based on two main things:
- The value of the car (known as the P11D value)
- The car’s BiK rate, which is mainly based on CO2 emissions
Once that taxable amount is worked out, it’s then taxed based on your income tax band. So, the higher the BiK rate, the more tax you pay each month through your payslip.
What’s changing in 2026?
Electric cars have enjoyed very low tax rates in recent years as the government encourages drivers to switch to zero-emission vehicles. But those rates are gradually rising. In the 2025/26 tax year, the rate sits at 3%, rising to 4% from 6 April 2026, and then to 5% in 2027/28.
Even though the percentage is increasing, EVs are still at the very bottom of the company car tax scale. Petrol and diesel cars can easily sit in the 25%-37% BiK range, depending on emissions.
How much could the 2026 increase cost me?
To make this easier to understand, let’s look at a typical example. Imagine you have a £40,000 electric company car. Here’s what the costs could look like at a 3% rate compared to a 4% one.
| Tax year | BiK rate | Taxable benefit | Basic rate (20%) per year | Higher rate (40%) per year |
|---|---|---|---|---|
| 2025/26 (old rate) | 3% | £1,200 | £240 (£20 per month) | £480 (£40 per month) |
| 2026/27 (new rate) | 4% | £1,600 | £320 (£26.67 per month) | £640 (£53.33 per month) |
So how much more will you pay?
The increase from 3% to 4% doesn’t sound like much, but it does show up on your payslip.
In this example:
- Basic rate taxpayer: almost £7 more per month
- Higher rate taxpayer: about £13 more per month
In most cases, that’s the real-world impact – a small monthly increase rather than a major jump.
Is it still worth choosing an EV as a company car?
Yes, and this is where the bigger picture really matters.
Even with the 4% increase, electric company cars are still significantly cheaper to tax than petrol or diesel alternatives. In other words, EVs are in a completely different tax bracket.
For example, a petrol car in a similar price range might sit around 31% BiK, compared with just 4% for an EV.
On a £40,000 car, that difference could mean:
- EV driver: a few hundred pounds a year in tax
- Petrol driver: several thousand pounds a year
That gap is still big enough to make electric cars one of the most cost-effective company car choices available.
What should you watch out for?
The main thing to be aware of in 2026 is that company car tax costs are gradually increasing year by year. The changes are relatively small, but they can add up over time, particularly if you’re renewing a lease, moving into a higher-value electric car, or comparing older salary sacrifice or lease quotes.
Because BiK rates are set by the government and change over time, what really matters is the rate that applies at the point your benefit is taxed. That’s why it’s important to check the latest figures before signing or renewing any agreement.
For most drivers, the increase will be noticeable but not significant in day-to-day terms. Electric company cars still remain one of the most tax-efficient employee benefits available, even as the tax system gradually adjusts over time.
Car change? Carwow!
Looking for a new set of wheels? With Carwow you can sell your car quickly and for a fair price – as well as find great offers on your next one. Whether you’re looking to buy a car brand new, are after something used or you want to explore car leasing options, Carwow is your one stop shop for new car deals.
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