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How do I Calculate Company Car Tax?

How do I Calculate Company Car Tax?


Having a company car isn't the perk it once was; Motoring journalist, John Swift takes a look at the current company car tax rates and what you could end up paying.

How Do I Calculate Company Car Tax?

What do I need to know in order to calculate the company cat tax i'll be liable to pay:

  • P11D Value - That's the list price of the car you've chosen plus delivery costs and any extra you selected
  • CO2 emissions - You need to know the CO2 emissions as g/km of your car. You can find this on the V5
  • Income Tax Band - You need to know whether you pay 20%, 40% or 45% income tax

Armed with this information and a BiK tax table (see below), you can work our precisely how much your car will cost you in tax.

Company Car Tax 2018 - 2019

The company car tax is a charge levied on anyone who is provided with a vehicle by their employer to do their job, but also for private mileage. The government see it is a perk, now known as a ‘benefit in kind’ or BiK, and of course, they make you pay for it.

The tax is now based upon both the delivered cost of the car (its P11D) and since 2002, its CO2 emissions. As with so many emission-based tax schemes, this is a bit of a grey area at the moment as the industry waits for the switch, from September 1, 2018, to the new method of measuring emissions, but it seems almost certain that this mean that emissions figures will rise.

Image which changes from beautiful green countryside on left to scorched earth on the left

That’s something to think about for the future, but the basic method of calculating your company car tax and how to choose the most tax efficient model will remain unchanged.

In essence, Her Majesty’s Revenue and Customs (HMRC) takes the P11D value, which is the sum of the vehicle’s list price, cost of delivery, VAT and any optional extras and multiply that by a BiK band percentage which is determined by where it sits on a sliding scale of its CO2 emissions.

The final tax bill you will get is that figure, multiplied by your income tax band, which will be 20%, 40% or 45% of your income, after the personal allowance.

Also keep in mind how fuel efficient your choice of car is; gas-guzzling fuel consumption will add £100s a year to your costs and you need to factor this in. Equally great fuel consumption or a hybrid can save £100s a year in fuel costs.

Pile of £20 notes spread out

So, you can see that someone choosing an expensive car with relatively poor emissions is going to pay a lot more, regardless of their income tax band, than someone opting for a cheaper, more efficient one.

However, electing to choose a Hybrid or electric car can pay dividends not only in fuel savings and less pollution, but also in your pocket with tax savings.

If it sounds complicated, take two examples:

Choose a diesel car with a P11D of £31,720:

  • CO2 emissions of 115 g/km puts you in the 28% BiK bracket
  • £31,720 X 28%= £8,881.60
  • If you pay income tax at 40% the HMRC will be asking you for £3,552.64

Choose a Jaguar I-PACE; an electric car with a PIID value TWICE that of the diesel at £63,440:

  • CO2 emissions of 0 g/km puts you in the 13% BiK bracket
  • £63,440 X 13%= £8,247.20
  • If you pay income tax at 40% the HMRC will be asking you for £3,298.88

Silver Jaguar I-PACE speeding along a road

You can see that choosing an electric vehicle has a massive effect. You can have a car worth twice as much, but the zero emissions mean that, from a company car tax perspective, you’ll pay less. Worth thinking about.

There is some bad news.

First, BiK rates go up every year.

Second, with the campaign against diesels, there is now a separate charge on diesel engined vehicles of an extra 4 per cent (since April 2018) over a petrol version.

Third now even electric vehicles with 0 g/km emissions are caught in the company car tax net, rated at 13%.

Keep all this in mind and don’t rush your choice of company car.

Here are the BiK Rates up to 2021:

BiK tax table