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Company Car Tax Advice

Company Car and Fleet Buyers Advice

If you are thinking of buying or updating your fleet or company car, there are many complexities that need to be understood before you make a purchase.

In this section, we have outlined the key facts you need to know, including (click on the facts to go straight to them):

1. Key Terms Explained

2. Company Car Tax (BIK)

3. P11D

4. Company Car Tax Bands

5. Free Car Fuel Benefit

6. VED Bands

7. Whole Life Costs for Company Car Fleets

Of course, these are only guides - and legislation does change. So, why not contact one of our fleet or local business specialists who will guide you through the process, offering expert advice. You can call or email them, call in or even request a visit to your business should that be more convenient.


Key Terms Explained

There are many terms used and jargon to understand when it comes to fleet and company car purchasing, so we've put together a quick glossary of all the key terms with a simple explanation.

P11D - A form sent to HMRC annually by employers stating any employee benefits such as a company car.

P11D Value - The total value of the car including list price plus VAT, delivery charges and any optional extras such as Sat Nav.

BIK – 'Benefit-in-Kind' - Are benefits excluded from your salary such as a company car.

HMRC – 'Her Majesty's Revenue & Customs' - A Government department responsible for the collection of UK taxes.

VED – 'Vehicle Excise Duty' - An amount payable on all cars, that is calculated based on your car's CO2 emissions.

WLC – 'Whole Life Costs' - The costs associated with running a vehicle such as fuel costs, service and maintenance, which are to be considered before purchase.


Company Car Tax (BIK)

Company car tax, also known as a Benefit-in-Kind tax (BIK), must be paid to Her Majesty's Revenue and Customs (HMRC) if you drive a company car for private use. This is because the company car is considered as an addition to your annual income, and as with any earned income, you must pay tax on it.

What is 'Benefit-in-Kind'?

HMRC deems anything that is supplied as a non-cash benefit to its employees liable for a tax charge – this is known as the BIK tax charge.

Company car tax calculator

How to calculate your company car tax:

1. Find out your P11D value. You can see how to calculate this here. Let's say it's £21,135, for example.

2. Find out your company car tax rate. You can see rates here. We'll use 15% as an example.

3. Find out your personal tax rate. This might be 20%, 40% or 50%. For our calculation, let's say it's 40%.

4. Now multiply the P11D value with your company car tax rate. £21,135 times 15% gives you a BIK amount of £3,170.25.

5. Then finally multiply the BIK amount with your personal tax rate. £3,170.25 times 40% gives you a total of £1,268 per year or £106 per month.

£21,135 (P11D) x 15% (BIK rate) = £3,170.25 x 40% (personal tax rate) = £1,268 py / £106 pm.

Alternatively, you can calculate your company car tax by completing the following form on the gov.uk website: http://cccfcalculator.hmrc.gov.uk


P11D

What is P11D?

A P11D is a benefit form required by Her Majesty's Revenue and Customs (HMRC) by employers to detail their employee's benefits from during the tax year, including company cars.

If you are an employee, in most cases your employer will complete the P11D and take the tax you owe for your company car out of your pay. This should be explained to you by your employer.

What is the P11D Value?

The P11D value is your car's list price (including VAT) as well as any delivery charges. It does not include the car's registration fee or the annual road tax. Optional extras must be added in this same way also.

For example, if the list price of your vehicle is £12,250, plus £500 delivery fees, £100 annual Vehicle Excise Duty (VED) and a £40 registration fee. The P11D value would be £12,750 (List price + delivery fees).

This P11D value is then used to calculate the amount of company car tax (also referred to as Benefit-in-Kind tax) you will pay to HMRC.


Company Car Tax Bands

If you own a company car you are liable to pay company car tax (also known as Benefit-in-Kind (BIK) tax) to Her Majesty's Revenue and Customs (HMRC).

Your company car tax rate (also known as a BIK rate) is calculated using your vehicle's CO2 emissions and fuel type. The table below shows this per year until 2020/21.

Read more about what Company Car Tax (BIK) is and how this will be used in conjunction with your vehicles P11D value and personal tax rate to determine your company car tax.

Tax year 2017/18 BiK% 2018/19 BiK% 2019/20 BiK% 2020/21 BiK%
CO2 (g/km) Petrol Diesel Petrol Diesel Petrol Diesel Petrol Diesel
0 9 12 13 16 16 19 2 2
1-50 9 12 13 16 16 19 14 17
51-54 13 16 16 19 19 22 15 18
55-59 13 16 16 19 19 22 16 19
60-64 13 16 16 19 19 22 17 20
65-69 13 16 16 19 19 22 18 21
70-74 13 16 16 19 19 22 19 22
75-79 17 20 19 22 22 25 20 23
80-84 17 20 19 22 22 25 21 24
85-89 17 20 19 22 22 25 22 25
90-94 17 20 19 22 22 25 23 26
95-99 18 21 20 23 23 26 24 27
100-104 19 22 21 24 24 27 25 28
105-109 20 23 22 25 25 28 26 29
110-114 21 24 23 26 26 29 27 30
115-119 22 25 24 27 27 30 28 31
120-124 23 26 25 28 28 31 29 32
125-129 24 27 26 29 29 32 30 33
130-134 25 28 27 30 30 33 31 34
135-139 26 29 28 31 31 34 32 35
140-144 27 30 29 32 32 35 33 36
145-149 28 31 30 33 33 36 34 37
150-154 29 32 31 34 34 37 35 37
155-159 30 33 32 35 35 37 36 37
160-164 31 34 33 36 36 37 37 37
165-169 32 35 34 37 37 37 37 37
170-174 33 36 35 37 37 37 37 37
175-179 34 37 36 37 37 37 37 37
180-184 35 37 37 37 37 37 37 37
185-189 36 37 37 37 37 37 37 37
190+ 37 37 37 37 37 37 37 37

However, from 2020/21, for all vehicles with CO2 emissions from 1-50g/km, range in zero emissions mode will be used to calculate your rate. These company car tax rates will be as per the table below:

Range in zero emissions mode (miles) BiK rate (%)
130+ 2
0-29 14
30-39 12
40-69 8
70-129 5

*There will be no 3% surcharge for diesel hybrids.


Free Car Fuel Benefit

If you drive a company car and receive free fuel for private use, this is subject to tax.

It's important to estimate your private mileage before you decide to take free fuel for private use, or you could end up financially worse off.

Watch our short video which will guide you through the calculations. You will need to know your Benefit-in-Kind (BIK) tax rate and Income tax bands to calculate the actual tax payable. You'll also need to understand your vehicle's fuel efficiency or MPG.

Alternatively, you can calculate your Car Fuel Benefit by completing the following form on the gov.uk website: http://cccfcalculator.hmrc.gov.uk/


VED Bands

Below are the Vehicle Excise Duty (VED) bands, also referred to as car tax rates or road tax rates. These rates are based on your vehicle's CO2 emissions for the first year, with a standard flat rate of £140 for subsequent years.

Any vehicles with zero emissions pay no VED. However, vehicles over £40,000 are subject to an additional £310 supplement paid between years' two to six.

CO2 Emissions First-year rate Standard rate
0 £0 £0
1-50 g/km £10 £140
51-75 g/km £25 £140
76-90 g/km £100 £140
91-100 g/km £120 £140
101-110 g/km £140 £140
111-130 g/km £160 £140
131-150 g/km £200 £140
151-170 g/km £500 £140
171-190 g/km £800 £140
191-225 g/km £1,200 £140
226-255 g/km £1.700 £140
over 225 g/km £2,000 £140

Whole Life Costs for Company Car Fleets

When you are purchasing a fleet, there are multiple costs that need to be considered before you make a decision. These are referred to as the vehicle's 'Whole Life Cost (WHC)'.

The Whole Life Cost considerations are as follows:

Vehicle Purchase Price

The price the car was paid for, including any discounts (this is not the list price).

Vehicle Registration Fee

A fee paid to the DVLA when the vehicle is first registered and taxed. This is currently charged at £55.

Vehicle Excise Duty (VED)

The first year of VED, based on your vehicle’s CO2 emissions, is included within the purchase price of your vehicle. For each subsequent year, this will be a standard flat rate of £140.

Vehicles with zero emissions are exempt and all vehicles with a list price over £40,000 will be subject to paying an additional £310 supplement between years' two to six.

It is also more commonly referred to as road tax or car tax.

Fuel Costs

The estimated total fuel costs for the vehicle.

If the vehicle is also available for the employee's private use, then the total fuel costs will depend on whether free fuel is provided for this. Use this calculator to calculate fuel costs for your vehicle - http://cccfcalculator.hmrc.gov.uk/

Service, maintenance and repairs

Projected costs for service, maintenance and repairs are set by data providers. These costs take into account the Manufacturer’s service scheduling and an allowance for tyre replacement based on the distance the vehicle will travel and over what time period.

Finance

Any finance costs related to the vehicle if it is not paid for in full upfront.

Insurance

Insurance needs to be considered whether this is on an individual model basis or on a Fleet policy.

Residual Vehicle Value

Residual value, also referred to as resale value is the amount taken from the sale of the car minus the purchase price. These values are set by data providers.

Class 1A National Insurance Contributions (NICs)

If the company car is made available for private use, this is seen as a benefit. On this basis, the employer will have to pay Class 1A NICs on the value of this benefit. This is the same case if free fuel is provided for the employee’s private use.

Plug-in Car Grant

This is a government grant used to encourage customers to consider an electric vehicle.

Qualifying vehicles are assigned to one of three different categories, based on a combination of zero emissions mode and CO2 emissions up to a max of 75g/km.

Please visit www.gov.uk/plug-in-car-van-grants/eligibility for confirmation of vehicle eligibility.

All of the above will together give you an informed view of the WLCs involved before you make any decisions.

Looking for a company car fleet to lease for your business? Check out JCT600 Vehicle Leasing Solutions.

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