A company car can be a great benefit to any employment package, but depending on the car, engine and even trim level, the incurred tax can take away some of the benefits. 

To compare both tax benefits and vehicle features, we’ve put together this guide offering up best cars on the market to choose from a company car scheme in the UK. 

How Does Company Car Tax Work?

Company Car tax, formally known as Benefit-in-Kind, is a tax on benefits received as part of a remuneration package from an employer, such as a company car. 

BiK rates vary depending on the employee's salary, the car's CO2 emissions and its electric-only range. They are updated yearly to adjust for changes in CO2 emissions ranges and electric vehicle technology. 

Currently, the rate is set at 2% for vehicles producing 0g/Km of CO2, AKA Electric Vehicles. Hybrids with more than 130 miles of electric-only range are charged the same. The rate increases as the cars’ electric-only range decreases.

The current rate for the lowest emitting non-electric vehicles is 15%. The highest band cars that emit more than 170 g of CO2 per Km, have a BiK rate of 37%.

How is Company Car Tax Calculated?

Whilst the benefit-in-kind rate is important, the value of the car - known as its P11D value -  and your tax band are also used to calculate the tax due on a company car. The P11D is simply the manufacturer's list price including VAT when the car was first registered.

To work out the company car tax you’ll be paying, use the following formula:

P11D Value X BiK Rate (%) X PAYE Tax Rate (%)

Cars With the Cheapest Company Car Tax

If reducing your tax bill is your main priority, these cars should be on your shortlist, they all have incredibly low company car tax rates.

BYD Dolphin - £30,195 - 2% BiK

BYD has taken the UK by storm in the last year or two, going from a complete unknown to one of the fastest-growing brands on sale. They offer a range of cheap EVs, but the most economical to purchase is the Dolphin. 

With a 45kWh battery and one motor acceleration and top speed aren’t the best on the market at 8.0 seconds to 60 and 99 mph, but its near 200-mile range is impressive. Some might not be a fan of the off-the-wall styling, but it certainly sets it apart on the road. 

MG MG4 EV - £26,995 - 2% BiK

Despite its relatively compact size, the MG4 packs a decent amount of battery capacity and power, with a range of well over 200 miles, and 200hp on tap. This makes it a good bit faster than other cars such as the  BYD.

The frontal styling is a little too angular for us, but the inside is a lot more toned down, with the classic MG badge on the centre of the multi-function steering wheel, and a large dash-mounted screen for infotainment. 

Because it's an EV and has a low starting price, the MG4 is one of the cheapest company cars on sale today.

Best Saloon Cars With Low Company Car Tax

Tesla Model 3 - £39,990 - 2% BiK

The Tesla Model 3 is one of the most popular EVs in the UK, with their practical, stylish seating for 5 adults and plenty of boot space. The high-performance and long-range versions offer something a little more powerful or versatile, too. 

Being fully electric, the benefit in kind is the lowest bracket at 2%.

KIA EV6 - £48,220 - 2% BiK

Looking for an EV but don’t need the neck-jolting acceleration that some offer? The KIA EV6 might be perfect. It maintains the chic styling of KIA’s new design philosophy, with a spacious interior and practical boot. 

Interior wise the EV6 combines modern screen tech with ‘old fashioned’ control layouts, maintaining some physical buttons for crucial features, something we love! As with the Tesla, the BiK rate is the lowest bracket.

Audi A3 40 Sportback TFSIe - £36,345 - 6% BiK

The well-known Audi hatchback is also available in a sleeker saloon body style, giving the compact passenger space with the 3-box design of the traditional saloon. In TFSI e guise the hybrid powertrain warrants the A3 40 a 6% BiK rate, not too far from some fully electric cars.

Being a German luxury marque the interior quality is top-notch, with high-quality plastics and soft touch materials throughout. 

Best SUVs with Low Company Car Tax

Peugeot e-5008 - £48,000 - 2% BiK

As the only fully electric 7-seat SUV on the market, if you need to carry 6 passengers on battery power alone, it is the one and only option. We suspect plenty of people will choose it not only out of necessity though, with its stylish interior and bodywork, and 400-mile range.

Because it’s an EV, the BiK rate is the lowest possible; 2%. This means the company car tax can be very low indeed.

BMW iX1 eDrive20 - £50,700 - 2% BiK

Available in single and dual motor, the iX1 is BMW’s small family EV SUV, it sports a pretty generous boot, with space enough for 4 adults, and certainly enough for 2 adults and 2 kids.

Regardless of the power or battery option selected the BiK rate is the lowest 2%. A shorter commute would be preferential when the iX1 only has a listed range of 322 miles. 

Porsche Macan 95 kWh - £69,855 - 2% BiK

For a luxury sports SUV, the Porsche Macan is ideal, with a ludicrous 630bhp available in the top, dual-motor model. Thanks to the electric powertrain, the BiK rate and as such company car tax is relatively low, with monthly tax figures starting at £24 per month.

The interior is just as stylish and well put together as the outside, in typical Porsche fashion. The Macan also supports the fastest charging architecture on the market, having compatibility with 800V networks. This can take the large battery from 10-80% charge in under 30 minutes.

Best Low Tax PHEV Company Cars

Mercedes C-Class C300e - £51,970 - 8% BiK

Hailed by many as the peak executive saloon, the Mercedes C-Class is the first choice for many for a luxury company car, the C300e takes that to new levels, with a very low BiK rate, thanks to its generous electric-only range.

Interior-wise there is everything you’d expect, with plush leather and wood trim. Air suspension keeps the ride taught but comfy, and the electric assist pushes you to 60mph in a very respectable 6.1 seconds.

Cupra Formentor 1.4 e-Hybrid - £45,500 - 12% BiK

Since splitting the brand from SEAT, the Cupra name has produced some great-looking cars, first and foremost being the Formentor. We think the brutish but sporty SUV strikes just the right balance of angular and sweeping. 

The 1.4 e-Hybrid powertrain delivers great fuel efficiency and a good EV-only range of 38 miles. This classifies it for the 12% BiK rate, not the best on this list, but still cheap, considering the shackles of an EV are virtually non-existent with the onboard petrol engine.

BMW 3 Series 330e - £51,775 - 8%

Another classic executive saloon, the 3 series has been the gold standard for company cars for years. 

With the new 330e having a PHEV powertrain in addition to the smooth 4-cylinder petrol engine, company car tax can be reduced significantly.

Exterior styling is very 3-series, which is definitely a good thing, not yet succumbing to the marmite styling of the new X5 and similar. Power is great too, with 287bhp from the combined power of ICE and electric, and a reasonable EV-only range of around 60 miles. 

Other Options

So we’ve taken a look at how company car tax works, and picked out some of the best makes and models to look into. However, if none of the cars we’ve discussed here take your fancy, there are dozens of other makes, models and body styles to choose from, many available on company car schemes.

If your employer doesn’t offer a company car scheme, or none of these options are appealing, a car subscription or lease could be worth investigating. From SUVs to cheap luxury cars we’ve got loads of info available on our blog.

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Author - Joseph Law

Joseph has been writing about cars for over seven years and writing for Bumper for over two, blending his passion for automobiles with a talent for storytelling.

Joseph has written about engineering and cars for Autozilla, Komaspec, and several engineering manufacturers. When he's not writing or tinkering with one of his five cars, Joseph dreams of owning an Alfa Romeo 33 Stradale.