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Company Car Tax

If a company car is supplied as part of your employment, and if you are able to use it for personal transport outside of work, then it becomes a taxable perk.

Call 0161 703 2549 or email info@championcontractors.co.uk

If a company car is supplied as part of your employment, and if you are able to use it for personal transport outside of work, then it becomes a taxable perk.

In official terminology your company car is a ‘Benefit In Kind’ (BIK), because your private use of the car has an actual monetary value. HMRC view that BIK is an addition to your normal income, because it is effectively paid for by your employer on top of your annual salary.

As in the case of all earned income, you will have to pay tax on it. 

The starting point for working out the tax rate for the car you wish to run is its carbon dioxide (CO2) emissions, as different emission level bands are taxed differently – each model of car has a specific P11D value. This value is the HMRC-recognised list price of the car including options that are added to the vehicle.

If the car costs less to buy than the official P11D value it will not save you any tax, as HMRC will say that the BIK value must remain the same. The BIK value is reduced however if you only have the car on a part-time basis or if you pay something towards its cost in the first place.

It’s important to note that company car tax bands are not the same as Vehicle Excise Duty car bands. There are currently thirty different levels of BIK company car tax bands.

The least polluting company car models earn a 16% BIK rate, while the highest polluters are taxed at 37%. As the tax year changes, rates will change, too.

To make things easier for you to understand, we have included a company car tax band table at the bottom of this page. This is for the 2019/20 financial year, after which, the bands will change again.

Diesel cars now have a 4% surcharge over petrol models with similar emission levels because they emit greater amounts of harmful particulates in the atmosphere.

So if you are choosing between petrol and diesel for your next company car, you will need to work out whether or not you will drive enough business miles in a year to cover the extra cost of the diesel tax burden.

Note – the surcharge does not apply to diesel vehicles that pass the new RDE2-certification for nitrogen oxide emissions.

The amount of company car tax you actually pay is dependent on your annual salary. For example, if you fall into the 20% income tax bracket, you will pay 20% of the taxable portion of the car’s P11D value. Those in the 40% tax bracket will pay 40% on the taxable value of the P11D.

Champion will provide specific advice to all customers who are considering a company car purchase.

You can calculate your company car tax liability by following these three simple steps:

1)   Take your company car’s P11D value (for example £30,000)
2)   Multiply this value by the car’s company car tax rate which is dependent on CO2 emissions (for example 19%) to obtain your BIK amount
3)   Multiply the BIK value by your personal tax rate - 20%, 40% or 50% - (for example 20%). This will be the amount of company car tax payable.
£30,000 x 19% = £5,700 (BIK amount) x 20% = £1,140 per year

Company car tax bands 2019/20:

CO2 Emissions (g/km) 2019/20 BIK Rate (%) Petrol 2019/20 BIK Rate (%) Diesel

0 to 50

16

20

51-75

19

23

76-94

22

26

95-99

23

27

100-104

24

28

105-109

25

29

110-114

26

30

115-119

27

31

120-124

28

32

125-129

29

33

130-134

30

34

135-139

31

35

140-144

32

36

145-149

33

37

150-154

34

37

155-159

35

37

160-164

36

37

165-169

37

37

170-174

37

37

175-179

37

37

180-184

37

37

185-189

37

37

190-194

37

37

195-199

37

37

200-204

37

37

205-209

37

37

210-214

37

37

215-219

37

37

220+

37

37

For further information, please contact Champion on 0161 703 2549.

Disclaimer: Please note, company car tax rules are complicated and the correct course of any action will be dependent on the personal/bespoke needs of each individual. The above information does not constitute professional advice, only general information.