Car Tax Calculator

Company car tax in the UK is a tax on the benefit employees receive from having a car provided by their employer for private use. Here's a beginner-friendly overview of how it works for the 2025/2026 tax year:

Benefit-in-Kind (BIK) Value

Definition: The BIK value represents the taxable value of the company car benefit.

Calculation Steps

1) Determine the Car's P11d value

• The P11d value is made up of the manufacturer's recommended retail price, including VAT and any options, but exclude the first-year registration fee and annual road tax.

2) Identify the CO₂ Emissions

• Find the car's official CO₂ emissions in grams per kilometre (g/km).
• If the car is a Hybrid PHEV, please also note down the Electric only mileage range

3) Apply the Appropriate Percentage

• Each CO₂ emission band has a corresponding percentage, known as the BIK rate.
• For the 2025/2026 tax year, these rates are set by HMRC and can be found in official tables.

4) Calculate the BIK Value

•  Multiply the car's list price by the appropriate percentage.

Income Tax Due

1) Calculation

• Multiply the BIK value by your income tax rate (20% for basic rate taxpayers, 40% for higher rate taxpayers).

2) Example Calculation

Car Details

P11d value: £30,000

CO₂ Emissions: 110 g/km

Fuel Type: Petrol

Steps

1) Identify BIK Rate

• For 110 g/km CO₂ emissions, the BIK rate is 27%.

2) Calculate BIK Value

• £30,000 × 27% = £8,100

3) Determine Income Tax Due

• Basic Rate (20%): £8,100 × 20% = £1,620 annually (£135 per month)
• Higher Rate (40%): £8,100 × 40% = £3,240 annually (£270 per month)

Additional Considerations

Diesel Cars

• Diesel vehicles meeting the Real Driving Emissions 2 (RDE2) standard are taxed at the same rate as petrol cars.
• Non-RDE2 compliant diesel cars incur an additional 4% surcharge, up to a maximum BIK rate of 37%.

Electric and Low-Emission Vehicles

• Zero-emission vehicles (electric cars) have lower BIK rates, encouraging environmentally friendly choices.
• For specific rates, refer to HMRC's BIK tables. 

National Insurance Contributions (NICs)

Employees

• No NICs are due on the company car benefit.

Employers

• Employers pay NICs on the BIK value at 15.05%.

Tools and Resources

HMRC's Company Car and Car Fuel Benefit Calculator

• Use this online tool to calculate the exact tax due for specific car models.

Commercial Tax Calculators

• Various online calculators can assist in estimating company car tax liabilities.

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