If you give employees benefits such as a company car or private medical cover, they are taxable and you pay Class 1A National Insurance on them. Here is how benefits in kind are valued and reported for 2026/27, the P11D deadlines, and how mandatory payrolling changes things from April 2027.
What counts as a benefit, how company cars are taxed, Class 1A NIC, the P11D deadlines, and the April 2027 payrolling change.
A benefit in kind (BIK) is a non-cash perk you give an employee or director — a company car, fuel, private medical insurance, a beneficial loan, gym membership and so on. Most are taxable: the employee pays Income Tax on the value, and the employer pays Class 1A National Insurance at 15% for 2026/27.
A company car's taxable value is its P11D value (list price plus accessories, including VAT) multiplied by an appropriate percentage set by HMRC according to CO₂ emissions. Electric and low-emission cars are taxed far more lightly than petrol or diesel.
| Car type | 2026/27 BIK band |
|---|---|
| Pure electric (zero emissions) | 4% |
| Low-emission (under 75g/km) | Tapered, low |
| Petrol / diesel (higher emissions) | Up to 37% |
| Diesel not meeting RDE2 | +4% supplement (max 37%) |
The same £40,000 car as a high-emission petrol model (37%) would give a £14,800 benefit and roughly £5,920 of employee tax — which is why salary-sacrifice electric cars are popular. The EV rate rises to 5% in 2027/28 and then by 2% a year to 9% by 2029/30, but stays far below petrol and diesel. Always confirm the exact percentage for a specific car on GOV.UK.
If you pay for private fuel in a company car, an extra charge applies (the appropriate percentage × £29,200 for 2026/27) — an all-or-nothing charge, so even one private litre triggers the full year. Van benefit and van fuel charges are flat rates uprated each year. A beneficial loan over £10,000 is taxed at the official rate of interest (3.75% for 2026/27).
For 2026/27 you report benefits that are not already payrolled on form P11D for each employee, and declare your total Class 1A NIC on form P11D(b). The key dates:
From 6 April 2027, payrolling benefits in kind becomes mandatory: tax and Class 1A NIC will be reported and paid in real time through payroll, and the P11D/P11D(b) process will no longer apply to most benefits. You can payroll voluntarily for 2026/27 by registering with HMRC before 6 April 2026. Plan now, because in the first year you may pay Class 1A for two years close together.
Some things are not taxable: trivial benefits under £50, most business expenses reimbursed at cost, employer pension contributions, eye tests for screen users, and from 2026 certain employer-funded homeworking equipment and health benefits processed through payroll.
gov.uk expenses and benefits · company cars · Class 1A NIC rates · payrolling benefits.
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Company cars, Class 1A NIC, P11D deadlines and the 2027 payrolling change — answered.
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