Company Car Tax

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. You don’t start paying tax until you earn over £10,600 a year, after which 20 percent will be paid. When your monthly salary exceeds £42,385, you will pay 40 percent on any amount over this threshold. This is normally deducted each month from your salary.

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

A: Not anymore, even electric cars were eligible at a seven percent rate in the 2017/18 tax year. Currently, electric cars sit in the 16% tax band for 2019/20 rates.

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 generally produce less CO2, so the tax bill should be smaller.

However, they are usually 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. Plus, diesel cars are currently penalised by a four percent surcharge which will be in place until at least 2021.

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 any real benefit.

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

A: From April 2015 zero-emitting cars are also subject to BIK tax. Although this will be cut to 0% BIK rate for the 2020/21 tax year.

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 as a company car 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 below

The table below outlines the tax payable on company cars over the next few years, arranged with by a car's emissions output: Remember that you need to add a further 4% - up to a maximum of 37% if you’re running a diesel car that does not conform to RDE2 emissions standards (or Euro 6d).

Emissions	Electric Range	2017/18	2018/19	2019/20	2020/21
CO2 (g/km)	Miles	% of P11D	% of P11D	% of P11D	% of P11D
0		9	13	16	2
1-50	More than 130	9	13	16	2
1-50	70-129	9	13	16	5
1-50	40-69	9	13	16	8
1-50	30-39	9	13	16	12
1-50	Less than 30	9	13	16	14
51-54		13	16	19	15
55-59		13	16	19	16
60-64		13	16	19	17
65-69		13	16	19	18
70-75		13	16	19	19 (70-74g/km)
76-79		17	19	22	20 (75-79g/km)
80-84		17	19	22	21
85-89		17	19	22	22
90-94		17	19	22	23
95-99		18	20	22	24
100-104		19	21	23	25
105-109		20	22	24	26
110-114		21	23	25	27
115-119		22	24	26	28
120-124		23	25	27	29
125-129		24	26	28	30
130-134		25	27	29	31
135-139		26	28	30	32
140-144		27	29	31	33
145-149		28	30	32	34
150-154		29	31	33	35
154-159		30	32	34	36
160-164		31	33	35	37
165-169		32	34	36	37
170-174		33	35	37	37
175-179		34	36	37	37
180-184		35	37	37	37
185+		36	37	37	37

Familiar company car tax terms

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.

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 calculated by 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 - currently £10,600.