Company Car Tax

Car Tax Calculation

Company Car Tax

Every driver of a company car or van who has the use of the vehicle for personal use is liable for Company Car Tax or Benefit in Kind to give its official name. Here are the top 10 questions we are asked.

Q1: How is Company Car Tax Calculated?
A: In simple terms it is the Recommended Retail Price including any extras known as the P11D value  x  CO2 Band percentage known as BIK Rate x the Drivers Personal Tax Rate. Vans and Commercial Vehicles have a "Flat Rate" Charge which in 2016/17 £3,170 per annum, a Basic Rate Tax payer (20%) will pay £634  and a Higher Rate Tax payers (40%) will pay £1268.

Q2: What is company car tax?
A: It is a charge HMRC calculate for the benefit of having the personal use of a company car or van and having the Insurance, Maintenance and Road Tax paid by the employer. If the employer pays for the personal fuel of the driver as well there is an additional tax known as the Fuel Supplement.

Q3: Are there any dispensations for low-emissions cars that aren't 100% electric?
A: A 7% BIK band is now in place for cars that emit below 50g/km CO2.

Q4: Is there a maximum price cap on the amount taxable on a company car?
A: No

Company Car Tax GraphicQ5: Why are diesels so popular?
A: The simple answer is they produce less CO2, so the benefit in kind rate is lower than the petrol equivalent.
Diesels are  more expensive to buy than an equivalent petrol version, so you have to make sure the higher P11D price doesn't outweigh any advantage from a lower tax band.
Fuel costs also need to be taken into account, because diesel cost is usually higher at the pumps than petrol.

Q6: Is there any reduction in Company Car Tax for an Electric Car with 0 g/kms CO2 emissions?
A: There is no reduction in the Company Car Tax payable,as a 0g/kms car the tax Benefit in kind banding is shown below.

Q7: What about hybrid cars? Where do they come into it?
A: Hybrid cars generally have lower CO2 emmisions than Petrol of Diesel equivalent models, they are taxed on the same basis as all other cars.

Q8: If I buy or lease a used car can I reduce the company car tax I have to pay?
A: Unfortunately not the tax is calculated on the Recommended Retail Price when new not the price you paid for the vehicle, manufacturers are continually improving the fuel economy of the new models which means the latest models have lower CO2 emissions than older models of the same car.

Q9: So how much should I expect to pay in company car tax?
A: The table below outlines the tax payable on company cars over the next few years, arranged with by a car's emissions output:

Diesel engine cars have a 3% supplement added to the P11D banding until April 2021.

% of P11D Price*

2016/17g/km 

2017/18g/km 

2018/19g/km 

2019/20g/km

2020/21g/km

0

-

-

-

-

 

5

-

-

-

-

 

7

0-50

-

 

-

 

9

-

0-50

-

-

 

10

-

-

-

-

 

11

51-75

-

-

-

 

12

-

-

-

-

 

13

-

51-75

0-50

-

 

14

-

-

-

-

 

15

76-94

 

-

-

 

16

95-99

 

51-75

0-50

 

17

100-104

76-94

-

-

 

18

105-109

95-99

-

-

 

19

110-114

100-104

76-94

51-75

0-50

20

115-119

105-109

95-99

-

-

21

120-124

110-114

100-104

-

-

22

125-129

115-119

105-109

76-94

51-75

23

130-134

120-124

110-114

95-99

-

24

135-139

125-129

115-119

100-104

-

25

140-144

130-134

120-124

105-109

76-94

26

145-149

135-139

125-129

110-114

95-99

27

150-154

140-144

130-134

115-119

100-104

28

155-159

145-149

135-139

120-124

105-109

29

160-164

150-154

140-144

125-129

110-114

30

165-169

155-159

145-149

130-134

115-119

31

170-174

160-164

150-154

135-139

120-124

32

175-179

165-169

155-159

140-144

125-129

33

180-184

170-174

160-164

145-149

130-134

34

185-189

175-179

165-169

150-154

135-139

35

190-194

180-184

170-174

155-159

140-144

36

195-199

185-189

175-179

160-164

145-149

37

200 and above

190 and above

180 and above

165 and above

150 and above

.
Q10: Company Car Tax bands change every year how can I avoid having a tax bill bigger than I expected.
A: The key date is the date of purchase or the date of the lease started, for example if the date is the 1st December 2017 when the vehicle is leased on a 4 year agreement, and the CO2 emissions are 99g/km. The company car tax will be 16% for the life of the lease.


Company car tax terminology

Additional rate - this is a tax rate for people earning over £150,000 each year, and is payable at 50%.
Basic rate - for 2016/2017 employees earning under £43,000 a year, a lower rate of tax is payable. With regards to company car tax, they are eligible for a 20% tax rate.
Benefit in kind (BIK) - this is any benefit which employees receive from employment but are not included in a salary. The obvious example in our case is company cars, which are taxed according to the income of the employee.
Emissions - the amount of gas the car emits from the exhaust. Measured in terms of CO2 for company car tax purposes.
g/km - the level of carbon dioxide emitted by a car is measure in grams per kilometre.
Higher rate - for 2016/2017 an employee earning between £43,001 and £150,000, a higher rate of tax is payable. With regards to company car tax, this means paying 40% tax.
P11d - this is the form that each employer must fill in annually and send to the tax office.
P11d value - this is the value of your car including RRP, VAT, delivery and any extras (such as metallic paint or satellite navigation). It does not include road tax or first registration fee..
Recommended retail price (RRP) - this is the amount the published price the car manufacturer  car charges for the vehicle and optional extras. It's likely that some RRPs will be very different from the actual price the customer pays for the car thanks to heavy discounting, so be aware that you may end up paying far higher tax on your car than you thought.
Vehicle Excise Duty (VED) - this is payable on all cars and vans, and is based on the CO2 output of the car in question.
 
This information is correct as of the 2016 budget, however you should speak to your tax advisor for more detailed information.

If you would like to discuss your own circumstances further then please get in touch on 01825 720900 or sales@neva-consultants.com