Is It Worth Having a Company Car in 2026?

Source: Shutterstock

Key Insights

• Company cars are highly worthwhile in 2026 if you choose electric: 3% BiK vs up to 37% for high-emission petrol/diesel vehicles
• Salary sacrifice schemes transform affordability, offering 20-50% savings vs traditional leasing while including all running costs
• High-mileage drivers (8,000+ miles annually) and higher-rate taxpayers benefit most from company car schemes
• Total cost of ownership heavily favors electric company cars: £2,500+ annual tax savings vs equivalent petrol models even with higher list prices

Company cars have changed significantly in recent years. With the UK's push towards Net Zero, the mainstream switch to electric vehicles, and a new wave of tax incentives, the question "Is it worth having a company car in 2026?" has become more relevant than ever.

The short answer? Yes… If you choose electric. But every driver's situation is different, and the right choice depends on mileage, tax bracket, vehicle type, and whether your employer offers a salary sacrifice scheme.

In 2026, company cars remain one of the most powerful employee benefits in the UK, particularly when paired with electric vehicles (EVs). Fully electric company cars attract a 4% Benefit-in-Kind tax rate from April 2026. In comparison, petrol and diesel cars can fall anywhere between 20% and 37% BiK, depending on emissions. That gap alone can save higher-rate taxpayers thousands of pounds a year!

On top of that, salary sacrifice transforms affordability, letting you pay for the car out of your gross salary. Many drivers save 20–50% compared to personal leasing - even before considering the much lower tax on EVs and the running cost savings they offer.

This guide walks you through everything you need to know to make an informed choice in 2026, including how company car schemes work, what's included, the pros and cons, how BiK is calculated, and real examples of what drivers pay in practice. Whether you're an employee making a personal decision or an HR leader building a benefits package, consider this your complete company car handbook for 2026.

What Is a Company Car Scheme?

A company car scheme is an employee benefit where your employer provides a vehicle for both business and personal use. While this type of benefit has been around for decades, today's schemes look very different from traditional fleets of the past.

From Fleet Cars to Today's Flexible Benefits

Historically, employers would purchase cars outright or via fleet leasing, issuing specific makes and models to staff who needed to travel for work. Drivers had little choice, and the cars were often high-emission petrol or diesel models.

In 2026, things look completely different:

• Employers rarely buy vehicles outright anymore

• Electric vehicles now dominate company car lists

• Drivers can usually make their pick from a broad choice of models

• Salary sacrifice has become the most common way to access EVs

• Businesses benefit from lower NI contributions

• Employees enjoy predictable, all-inclusive motoring costs

The company car has shifted from a "perk of the job" to a tax-efficient, cost-saving tool that can apply to almost any employee.

Types of Company Car Arrangements

You'll find three main structures in 2026:

1. Employer-Owned Vehicles

Your employer leases or owns the car, and you pay BiK tax for using it privately. This is common in sales roles, field operations, and positions that require regular travel.

Advantages	Disadvantages
No upfront cost	Usually a set list of cars
Employer handles everything	Less flexibility than salary sacrifice
Access to newer, safer vehicles

2. Salary Sacrifice

This is now the most popular option for electric company cars. You give up a portion of your gross salary, and in return, you receive a fully maintained EV. Because your taxable income falls, you save:

• Income tax

• National Insurance

• Employer also saves NI, helping fund the scheme

Salary sacrifice is particularly powerful when combined with EV BiK rates of just 4% from April. Many employees find they can access a far more premium vehicle than they could afford privately.

Car Allowance

In the case of a car allowance, instead of receiving a car, your employer gives you an extra salary. You then buy or lease your own vehicle, pay for insurance, maintenance, tyres, and handle depreciation yourself. This is flexible, but far less tax-efficient. You pay income tax and NI on the allowance, which reduces the amount available for your running costs.

What's Included in a Modern Company Car Scheme?

Most company EV schemes in 2026 are all-inclusive.

Your monthly amount typically covers:

• Vehicle lease

• Servicing, maintenance, and wear-and-tear items

• Tyres

• Breakdown cover

• MOT (if required)

• Road tax (VED) - now applicable to EVs

• Comprehensive insurance (in many schemes)

Image source: Shutterstock

Some schemes also include help with:

• Home charger installation

• Cheaper EV charging via partner programmes

This bundled approach is one of the main reasons company cars, especially electric ones, are so cost-effective compared to owning a car privately.

Benefits of Company Car Schemes

Company car schemes offer a long list of advantages, especially for anyone choosing an electric vehicle. Below are the major benefits that typically make company cars highly worthwhile.

Significant Tax Advantages with Electric Vehicles

This is the biggest reason company cars offer such compelling value in 2026.

The Benefit-in-Kind (BiK) tax on electric vehicles is exceptionally low:

• 4% from April 2026

• Then rising gradually to 5%, 7%, and 9% by 2029/30

By contrast, petrol and diesel vehicles can attract BiK rates of up to 37%.

Here's what that difference looks like in practice.

Example: EV vs Petrol

Take two similarly priced cars:

• Tesla Model 3 – EV: P11D value £39,990, BiK rate 3%

• BMW 320i – Petrol: P11D value £40,000, BiK rate approx. 30%

Vehicle	P11D Value	BiK Rate	20% Taxpayer Monthly	40% Taxpayer Monthly
Nissan Ariya EV	£48,000	3%	£24	£48
BMW 3 Series Diesel	£45,000	30%	£225	£450
Mercedes E-Class Petrol	£50,000	35%	£291	£583

Access to Premium Vehicles at Lower Costs

Because salary sacrifice uses your gross salary, you save tax on the payment itself. This means you can often drive a better car for far less than you would pay privately.

For example, a premium electric SUV worth around £60,000 might cost:

• £1,100/month on a personal lease

• £550/month through salary sacrifice once tax savings apply

That difference puts vehicles like Audi, Mercedes, Tesla, and Polestar within reach for many employees.

Zero Depreciation Risk

Depreciation is the highest hidden cost of car ownership. A car can lose 40–60% of its value over three years.

With a company car:

• You never own it

• You hand it back at the end

• You're protected from resale risk

• You avoid the stress of selling or trading

This alone can make leasing through your employer cheaper than ownership.

Drive the Latest Technology

Company car contracts typically run for 2-4 years, meaning you regularly upgrade to newer vehicles.

With EV technology moving rapidly, this means you always have:

• Better range

• Smarter driver assistance systems

• Improved safety features

• New battery efficiency

• Faster charging speeds

If you value being behind the wheel of something modern, this matters.

All-Inclusive Peace of Mind

Everything is covered in one predictable monthly amount. There are no surprise garage bills, no tyre costs, no roadside membership fees, and no scrambling to arrange insurance renewal. This makes budgeting simple and pairs well with the convenience of electric driving.

Environmental Benefits

More businesses are prioritising sustainability. By choosing an electric company car, you:

• Reduce your personal carbon footprint

• Support your employer's Net Zero goals

• Avoid most Clean Air Zone and ULEZ charges

• Contribute to cleaner air in cities

For organisations with ESG targets, electric company cars can be an important piece of the puzzle.

Disadvantages and Limitations

Image source: Shutterstock

Company car schemes aren't right for everyone. Here's what to consider before making your decision.

You Still Pay BiK Tax (Even If It's Low for EVs)

While electric vehicles have very low BiK, the tax still exists.

Example for a £40,000 EV at 4% BiK:

• Annual BiK: £1,600

• Monthly BiK value: £133.33

• 20% taxpayer: £27/month

• 40% taxpayer: £53/month

This is far lower than what most drivers spend on fuel in a petrol car, but it's still worth factoring into your budget.

Fuel Benefit Tax Can Be Costly

Fuel benefit tax applies if your employer pays for all your private fuel or charges.

The multiplier for 2025/26 is £28,200. For an EV at 3% BiK:

• £28,200 × 3% = £846

• Higher-rate taxpayer pays £338/year

For petrol cars at higher BiK rates, this can run into thousands.

Most employees choose to:

• Pay for their own fuel or charging

• Claim HMRC business mileage where needed

• Avoid the fuel benefit tax entirely

It's usually the more cost-effective approach. The Charge Scheme offers a solution to this!

Less Flexibility Than Personal Ownership

Company cars come with a few rules you'll need to follow:

• No modifications (e.g. wraps, remaps, spoilers)

• Mileage limits

• Possible excess mileage charges

• Restrictions on who can drive the car

• No option to keep the vehicle at the end

If you want full control over your car, this may feel a bit restrictive. But for most drivers, these limitations are a fair trade-off for the convenience and savings.

Job Dependency

Your company car is tied to your employment. If you:

• Change jobs

• Are made redundant

• Move to a non-eligible role

…you may need to return the vehicle quickly.

Good salary sacrifice schemes often include early termination protection for employers, but there may still be a short transition period for you to arrange alternative transport. It's worth checking your scheme's terms before signing up.

No Equity in the Vehicle

Because you never own the car, you never build an asset. However, given how quickly cars depreciate, especially combustion models, many employees see this as a benefit rather than a drawback. You're essentially protected from losing money on depreciation.

Image source: Shutterstock

Possible Pension Impact

Salary sacrifice reduces your gross salary, which can:

• Reduce pension contributions

• Lower employer-matching amounts

Many employers use a notional or reference salary to calculate pension contributions, so this isn't always an issue. But it does vary, so it's worth checking with your HR team. The potential pension reduction is usually small compared to the tax savings on the car.

Mortgage Application Considerations

Salary sacrifice lowers your official salary on paper, and mortgage lenders look closely at income. Most lenders are familiar with salary sacrifice, but you should:

• Inform your lender upfront

• Be prepared to provide documentation

• Consider the timing of applications if you're close to affordability thresholds

A quick conversation with your broker can usually clear this up.

Company Car vs Car Allowance: Which Is Better in 2026?

Many employers offer a choice between a company car and a cash allowance. The right option depends on your driving needs, tax position, and how much responsibility you want for running the car.

Side-by-Side Comparison

Factor	Company Car (Electric)	Car Allowance
Upfront cost	£0	Need to buy/lease car
Monthly cost	Salary sacrifice + low BiK	Allowance minus tax minus all costs
Tax efficiency	Excellent (3% BiK)	Allowance taxed at marginal rate
Included services	Everything	Must arrange separately
Flexibility	Limited	Complete freedom
Depreciation risk	None	You absorb
Latest tech	Automatic	Your choice

When a Company Car Is Usually the Better Option

A company EV tends to win if:

• You drive 8,000+ miles a year

• You're a 40% or 45% taxpayer

• You value convenience and predictable costs

• You don't want to deal with insurance, maintenance, or depreciation

• You want access to a better vehicle for less money

• Your employer offers salary sacrifice

When a Car Allowance Makes Sense

A cash allowance may suit you if:

• You drive very few miles

• You already own a suitable car

• You need modifications

• You want absolute flexibility

• You don't need a car and prefer cash

The choice between salary sacrifice and car allowance often comes down to your annual mileage, tax bracket, and preference for convenience versus flexibility.

Worked Example: £6,000 Car Allowance vs Electric Company Car

Scenario:

• Car allowance: £6,000/year

• Salary sacrifice EV: £40,000 P11D value

• Tax bracket: 40%

Car Allowance Breakdown	Salary Sacrifice Breakdown
Gross allowance: £6,000	Gross sacrifice: £450/month
Income tax (40%): –£2,400	Tax + NI savings: £189/month
NI (2%): –£120	Effective sacrifice cost: £261/month
Net amount: £3,480/year (£290/month)	EV BiK (3%): £40/month
Now consider real costs:	Total net cost: £301/month—and that includes everything.
Lease/finance: ~£400/month
Insurance: ~£80/month
Maintenance: ~£50/month
Total: £530/month
Your allowance covers only £290, so you're £240/month out of pocket.	Result: Company car wins by ~£541/month (£6,492/year).

Understanding Company Car Tax in 2026

Benefit-in-Kind tax is the cornerstone of company car tax. Once you understand how it's calculated, everything else makes sense.

How BiK Is Calculated

The formula: P11D value × BiK % × your tax rate

Where:

• P11D value = list price including options

• BiK % = based on CO₂ emissions

• Tax rate = 20%, 21%, 40% or 45%

2025/26 BiK Rates

Vehicle type	BiK rates
EVs (0g/km)	4%
1–50g/km (PHEVs)	4-15%, depending on electric range
51–75g/km	16-20%
76–90g/km	21-24%
91–130g/km	roughly 25-30%
131g/km+	31–37%

BiK bands reward low-emission choices and penalise higher-emission vehicle use.

Future BiK Rates (Announced)

Tax Year	EV BiK Rate	Petrol/Diesel Range
2025/26	3%	16-37%
2026/27	4%	16-37%
2027/28	5%	16-37%
2028/29	7% (projected)	16-37%
2029/30	9% (capped)	16-37%

Even at 9%, EVs will still be far cheaper in tax terms than petrol or diesel cars.

Road Tax (VED) for EVs

From April 2025:

• £10 first-year rate

• £195/year standard rate thereafter

Your employer typically handles this as part of the scheme.

Fuel Benefit Tax

This is usually of poor value unless you do extremely high mileage. Most employees avoid fuel benefit tax by:

• Paying for their own fuel or electricity

• Claiming business mileage at HMRC's 45p per mile for the first 10,000 miles

• Then 25p per mile thereafter

Image source: Shutterstock

Decision Framework: Is a Company Car Right for You?

Here's a simple checklist to help you evaluate your situation.

A Company Car Is Worthwhile If:

• You drive 8,000+ miles/year

• You're a higher-rate taxpayer

• An EV is available through your employer

• Salary sacrifice is offered

• You want convenience over flexibility

• You have home or workplace charging

• You don't need car modifications

• You're not in the middle of a mortgage application

Consider a Car Allowance Instead If:

• You rarely drive

• You already own a suitable car

• You need modifications or specialist equipment

• You prefer full control and owning the car

• You're a basic-rate taxpayer with low mileage

• You expect job changes soon

Vehicle Choice Matters Most

Electric vehicles are the standout choice in 2026:

• Lowest BiK (4%)

• Lowest running costs

• Best salary sacrifice value

• No ULEZ or CAZ charges

• Most future-proof option

Plug-in hybrids offer moderate BiK and suit drivers needing occasional long-distance flexibility. Petrol and diesel should generally be avoided unless essential due to high tax costs.

Real World Examples

Here are some examples of what company car drivers may pay in practice.

Example 1: Regional Sales Manager

Profile:

• 15,000 miles/year

• Salary: £55,000

• Vehicle: Nissan Ariya (P11D £48,000)

Item	Amount
Salary sacrifice	£500/month
Tax + NI saving	£210/month
Effective cost after savings	£290/month
BiK	£48/month
Total net cost	£338/month

Example 2: Finance Manager

Profile:

• 8,000 miles/year

• Salary: £45,000

• Vehicle: MG4 Extended Range (P11D £32,000)

Item	Amount
Salary sacrifice	£320/month
Tax + NI saving	£134/month
Effective cost after savings	£186/month
BiK	£32/month
Total net cost	≈ £218/month

Example 3: Director

Profile:

Profile:

• 12,000 miles/year

• Salary: £80,000

• Vehicle: Polestar 3 (P11D £65,000)

Item	Amount
Salary sacrifice	£680/month
Tax + NI saving	£286/month
Effective cost after savings	£394/month
BiK	£65/month
Total net cost	≈ £459/month

The Salary Sacrifice Advantage

Salary sacrifice is central to the value of electric company cars.

How It Works

1. You sacrifice part of your gross salary

2. Your taxable income falls

3. You save income tax and NI

4. The employer also saves NI

5. You pay BiK separately

Cost Component	Traditional Lease	Salary Sacrifice (40% Tax)
Gross cost	£600/month	£600/month
Income tax saving	£0	-£240/month
NI saving	£0	-£12/month
Your net cost	£600	£348
Savings	-	42%

2026-Specific Considerations

Several policy and market developments make 2026 a particularly strong year for electric company cars.

Policy Updates

• EV road tax began in April 2025 (£10 first year, then £195)

• Ultra-low EV BiK guaranteed through to 2029/30

• Mileage-based EV road charging announced for 2028 (no impact in 2026)

Charging Infrastructure

Public charging has grown quickly. As of Autumn 2025, the UK has:

• 86,000+ public charge points

• Including over 17,000 rapid and ultra-rapid chargers

This makes EV company cars more practical than ever.

Vehicle Technology Advances

In 2026, EVs offer:

• 250–300+ mile real-world range

• Sub-20-minute rapid charging with 800V systems

• Improved winter performance via heat pumps

• Increasing availability of used EVs (with some schemes now including them)

Employer Perspective: Why Organisations Offer Company Car Schemes

For businesses, electric company car schemes provide tangible benefits:

• Recruitment & Retention - A desirable benefit that appeals to a wide range of employees.

• Cost Savings - Employers save 13.8% NI on sacrificed salary.

• ESG Impact - Company EV schemes help achieve carbon-reduction targets.

• Duty of Care - Employees drive safer, newer vehicles.

• No Capital Outlay - Employers don't need to buy cars; the scheme is budget-neutral or better.

Frequently Asked Questions

Q: Can I use the car for personal journeys?

A: Yes, BiK covers personal use.

Q: What happens if I change jobs?

A: You'll normally return the car. Some schemes allow transfers; employer protection often covers early termination fees.

Q: Does salary sacrifice impact my pension?

It can, depending on your scheme. Many employers use a pre-sacrifice reference salary to avoid reducing contributions.

Q: Will it affect my mortgage application?

A: It may affect affordability calculations, but lenders are familiar with salary sacrifice.

Q: Can I choose any car?

A: Usually from an employer-approved list, with EVs strongly favoured.

Q: What's the best company car to choose?

A: A pure electric vehicle - lowest BiK, lowest running costs, best value.

Final Verdict: Is a Company Car Worth It in 2026?

If you choose an electric vehicle, yes - absolutely. In 2026, an electric company car through salary sacrifice is one of the most cost-efficient, tax-efficient and stress-free ways to drive a new vehicle in the UK.

Why?

• 3% BiK for EVs (4% from April 2026)

• 20–50% savings via salary sacrifice

• All-inclusive running costs

• No depreciation

• Premium vehicles at lower monthly costs

• Over 86,000 charge points across the UK

• Strong environmental benefits

A company car is especially worthwhile if:

• You are a 40–45% taxpayer

• You drive 8,000+ miles a year

• You value convenience

• You want the latest tech

• Your employer offers salary sacrifice

You might look elsewhere if you drive very little, already own a great car, or need maximum flexibility.

The 2026 Sweet Spot

Choose a fully electric company car through a salary sacrifice scheme. It delivers the lowest tax, the highest savings, and the smoothest day-to-day experience.

Next Steps

• Check whether your employer offers an EV salary sacrifice scheme

• Use The Electric Car Scheme's calculator to estimate your savings

• Compare company car vs car allowance numbers

• Browse electric vehicles that fit your lifestyle

You'll likely find that 2026 is one of the best years yet to switch to an electric company car!

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Last updated: 03/12/2025

Our pricing is based on data collected from The Electric Car Scheme quote tool. All final pricing is inclusive of VAT. All prices above are based on the following lease terms; 10,000 miles pa, 36 months, and are inclusive of Maintenance and Breakdown Cover. The Electric Car Scheme’s terms and conditions apply. All deals are subject to credit approval and availability. All deals are subject to excess mileage and damage charges. Prices are calculated based on the following tax saving assumptions; England & Wales, 40% tax rate. The above prices were calculated using a flat payment profile. The Electric Car Scheme Limited provides services for the administration of your salary sacrifice employee benefits. The Electric Car Scheme Holdings Limited is a member of the BVRLA (10608), is authorised and regulated by the FCA under FRN 968270, is an Appointed Representative of Marshall Management Services Ltd under FRN 667174, and is a credit broker and not a lender or insurance provider.

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