25 March 2013 by Gareth Evans Last Updated: 19 Mar 2014

Updated for 2014 budget.

All you need to know about company car tax including how it is calculated and what it means for you as a company car driver.

 Q: What is company car tax?

A: A tax which is payable on a certain percentage of the total P11d value of your car. The percentage is determined based on the emissions of the car. People earning £32,010 per year or less will have to pay 20% of this amount in tax, and people earning over that amount will have to pay 40%. If you're lucky enough to earn over £150,000 each year you'll have to pay 50%. This is normally deducted each month from your salary.

Q: Are there any dispensations for low-emissions cars that aren't 100% electric?

A: A 5% BIK band is now in place for cars that emit below 75g/km CO2, but that'll change in 2015 as outlined in the table below.

Q: Is there a maximum price cap on the amount taxable on a company car?

A: No, after April 1 2011 the £80,000 cap no longer exists.

Q: Why are diesels so popular?

A: The simple answer is they produce less CO2, so the tax bill should be smaller.

However, they are usually significantly 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.

You also need to do your homework on fuel costs, because diesel costs more at the pumps than petrol and you need to meet the predicted fuel economy figures from the manufacturer to gain a real benefit.

Q: Will electric cars be exempt from company car tax?

A: Until April 2015 - as outlined in the table below.

Q: What about hybrid cars? Where do they come into it?

A: Hybrid cars currently conform to the same tax rules as petrol cars. This means they sit in lower bands, so you'll pay less tax for owning them.

Q: So how much should I expect to pay in company car tax?

A: You can use the Parker's company car tax calculator

The table below outlines the tax payable on company cars over the next few years, arranged with by a car's emissions output:

% of P11D  2014/15 2015/16  2016/17  2017/18 2018/19 
Price CO2 (g/km) CO2 (g/km) CO2 (g/km) CO2 (g/km) CO2 (g/km)
0 0 0 N/A N/A N/A
5 1-75 0-50 N/A N/A N/A
6 N/A N/A N/A N/A N/A
7 N/A N/A 0-50 N/A N/A
8 N/A N/A N/A N/A N/A
9 N/A 51-75 N/A 0-50 N/A
10 N/A N/A N/A N/A N/A
11 76-94 N/A 51-75 N/A N/A
12 95-99 N/A N/A N/A N/A
13 100-104 76-94 N/A 51-75 0-50
14 105-109 95-99 N/A N/A N/A
15 110-114 100-104 76-94 N/A N/A
16 115-119 105-109 95-99 N/A 51-75
17 120-124 110-114 100-104 76-94 N/A
18 125-129 115-119 105-109 95-99 N/A
19 130-134 120-124 110-114 100-104 76-94
20 135-139 125-129 115-119 105-109 95-99
21 140-144 130-134 120-124 110-114 100-104
22 145-149 135-139 125-129 115-119 105-109
23 150-154 140-144 130-134 120-124 110-114
24 155-159 145-149 135-139 125-129 115-119
25 160-164 150-154 140-144 130-134 120-124
26 165-169 155-159 145-149 135-139 125-129
27 170-174 160-164 150-154 140-144 130-134
28 175-179 165-169 155-159 145-149 135-139
29 180-184 170-174 160-164 150-154 140-144
30 185-189 175-179 165-169 155-159 145-149
31 190-199 180-184 170-174 160-164 150-154
32 195-199 185-189 175-179 165-169 155-159
33 200-204 190-194 180-184 170-174 160-164
34 205-209 195-199 185-189 175-179 165-169
35 210+ 200-204 190-194 180-184 170-174
36 N/A 205-209 195-199 185-189 175-179
37 N/A 210+ 200+ 190+ 180+

 

  • Up to the end of tax year 2014/15 add 3% for diesel cars up to a maximum of 35%
  • For tax year 2015/16 add 3% for diesel cars up to a maximum of 37%
  • In 2016/17 petrol and diesel cars are treated equally for company car tax purposes.

 

 

Familiar company car tax terms

Additional rate - this is a tax rate for people earning over £150,000 each year, and is payable at 50%.

Basic rate - for 2011/2012 employees earning under £35,000 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 2011/2012 an employee earning between £35,001 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.

Personal tax allowance - this is a sum of money that you're allowed to earn without being taxed upon it. For 2011/2012 this amount was £7,475.

Recommended retail price (RRP) - this is the amount the car manufacturer thinks its car is worth. 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 is based on the CO2 output of the car in question. 

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