Petrol, Diesel, Hybrid or Electric? The Company Car Numbers Compared

If you have decided a company car makes sense, the next question is what sort. And here the tax system is not subtle: it has picked a winner, and it is prepared to charge you a great deal of money for disagreeing.

One number drives nearly all of this. The taxable value of a company car is its list price multiplied by a percentage set by HMRC, and that percentage depends almost entirely on what comes out of the exhaust. Get the percentage right and a company car is cheap. Get it wrong and it is one of the most expensive things you can do.

Fully electric: 4%

A zero-emission company car is taxed on 4% of its list price in 2026/27. That is the whole benefit.

On a £40,000 electric car the taxable benefit is £1,600. A higher-rate taxpayer pays £640 a year in income tax on it — about £53 a month. A basic-rate taxpayer pays £320.

The rate is legislated to climb: 5% in 2027/28, 7% in 2028/29 and 9% in 2029/30. Worth planning for, but even at 9% it is still less than a third of what a petrol car costs today.

Petrol and diesel: 17% to 37%

Cars emitting 51g/km or more are taxed on a sliding scale that starts around 17% and runs to a maximum of 37%. Most ordinary petrol cars sit a long way up it.

Take that same £40,000 car as a petrol model emitting 120g/km — nothing exotic, a fairly typical family car. The percentage is around 29%, so the taxable benefit is £11,600. A higher-rate taxpayer pays about £4,640 a year, or £387 a month.

That is roughly £334 a month more than the electric equivalent, on the same list price, for the same driver. It is the single biggest number in this whole series.

Diesel has one extra trap. A diesel that does not meet the RDE2 emissions standard picks up a 4% supplement on top of its normal rate, capped at 37% overall. Newer diesels generally comply, older ones often do not, and it is worth checking rather than assuming.

Plug-in hybrids: it depends entirely on the electric range

Hybrids are where people get caught out, because they are sold as the sensible middle ground and the tax treatment does not agree.

For cars emitting 1–50g/km, the 2026/27 percentage depends on how far the car will go on electricity alone:

• 130 miles or more — 4%
• 70 to 129 miles — 5%
• 40 to 69 miles — 8%
• 30 to 39 miles — 12%
• Under 30 miles — 16%

In theory a long-range hybrid matches an EV. In practice very few plug-in hybrids on sale manage 70 miles of electric range, let alone 130, so most land in the 8% to 16% bands. A hybrid with under 30 miles of range is taxed at four times the rate of a fully electric car.

And there is a change coming that matters if you are signing a three or four-year deal. From 2028/29 the electric-range bands disappear entirely. Every plug-in hybrid in the 1–50g/km band goes to a flat 18%, then 19% in 2029/30. So a hybrid you take today at 8% could be taxed at 18% before the contract ends — more than double, with nothing you can do about it. If you are choosing a hybrid, model the cost across the whole term, not just year one.

The bit people forget: your company pays too

The percentages above set what you pay in income tax. But the company pays employer’s Class 1A National Insurance on the same taxable benefit, at 15%.

On the electric car that is 15% of £1,600 — £240 a year. On the petrol car it is 15% of £11,600 — £1,740 a year. So the fuel choice does not just hit the driver’s pay packet; it lands on the business as well, and it scales in exactly the same way.

Add the two together and the petrol car costs the household and the company around £6,380 a year between them. The electric one costs £880.

One trap that now catches electric cars too

Worth knowing before you order something well-specified: cars with a list price over £40,000 registered after April 2025 attract the vehicle excise duty expensive car supplement of £390 a year for five years. Electric cars used to be exempt from this. They are not any more.

It is road tax rather than a benefit-in-kind charge, so it does not change the percentages above, but it is a real cost and it catches a lot of the mid-size electric SUVs that Kent business owners actually want. If you are hovering either side of £40,000 on list price, it is worth a conversation.

So what does this mean in practice?

If you want an electric car, a company car works. At 4%, the tax on the benefit is small enough that the company paying for the car comfortably beats you paying for it out of taxed income. That is the case we worked through in part one.

If you want petrol or diesel, it usually does not. A 29% benefit on a £40,000 car costs you £4,640 and the company £1,740, every year. Against that, claiming 55p a mile on your own car — £5,500 tax-free on 10,000 business miles, with no benefit in kind and no Class 1A at all — is very hard to beat. For most Kent business owners wanting a conventional car, the mileage claim is the answer.

If you want a hybrid, check the electric range before anything else. Above 70 miles and it behaves almost like an EV. Below 30 and you are paying four times as much. And whatever band you start in, remember it becomes 18% from 2028/29.

One last thing, because it is the most common mistake we see: the percentage applies to the manufacturer’s list price, not what the car costs you. A heavily discounted car, or a keenly priced lease, does not reduce the benefit at all. Options added at the factory increase it. Two cars at the same monthly payment can carry very different tax bills, and the only way to know is to look up the specific model before you order it.