Car Tax Calculator

When a company car is made available for the private use of an employee a taxable 'benefit in kind' value is calculated in relation to the car. The 'benefit in kind' value is calculated by multiplying the car's list price when new by a percentage. The percentage used is based on carbon dioxide (CO2) emissions measured in grams per kilometre (g/km) and will be in the region 10-35%. The percentage charge rises by 1% for every 5g/km over the minimum benchmark level which is set by HM Revenue and Customs (HMRC). The taxable benefit can clearly be reduced by choosing a company car with a low CO2 emissions rating.

For diesel fuelled cars only an additional 3% supplement charge, capped at 37%, will also be added to the relevant percentage. Diesel engines though generally have lower CO2 emissions than their equivalent petrol engine.

Income tax is due on the value of the benefit, as calculated above, at an employee's marginal rate of income tax (20% or 40%). No National Insurance Contributions are due by the employee on the provision of a company car that is made available for their private use.

Example:

The following provides an example of how the benefit value and corresponding income tax liability would be calculated for an employee who has been provided with a company car that is made available for private use at the start of the 2017/18 tax year:

• List price of car when new: £22,000
• CO2 emissions of car: 109 g/km
• Fuel: Diesel
• Relevant percentage: 23%
• Value of benefit: 22,000 x 0.23 = £5,060
• Income tax due (basic rate taxpayer): £5,060 x 0.20 = £1,012 (£84.33 per month)
• Income tax due (higher rate taxpayer): £5,060 x 0.40 = £2,024 (£168.67 per month)

 

For further information on company car tax please visit HMRC's website by clicking on the following link: http://www.hmrc.gov.uk/calcs/cars.htm

Alternatively, further information on company car tax (including a table of percentage charge relative to CO2 emissions) is also published by the AA:

The information detailed above is based on current tax legislation which may change in the future. Please take this into account when choosing your vehicle which is leased for four years. Any changes to the car benefit rules will be announced at either a Pre-Budget Report or at the Budget.

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