posted 1 year ago

Company Car Tax – Everything You Need to Know

Benefit in kind, P11D and company car tax explained. Plus rates for 2015-2016 to 2019-2020

Whether you’re looking into getting your first company car, or working out next year’s benefit in kind, company car tax can be difficult to get your head around. We’ve put together a simple guide to explain company car tax.

What Is Benefit In Kind?

Benefit in kind is a perk that an employee/director receives via work but is not included in the salary. A company car, for example. This type of perk – which is also known as a fringe benefit - is subject to company car tax if the motorist uses it for private trips as well as business. Examples include travelling between home and work, taking the children to school and holidays. 

How much company car tax a motorist pays is based, in part, on a P11D value. This incorporates the vehicle's list price plus delivery, optional extras and registration plates. The motorist pays tax on a percentage of this sum. What percentage is defined by the vehicle's emissions (CO2). The lower the emissions the lower the percentage. 

What is a P11D Form?

The P11D is a statutory form required by HMRC from UK based employers. The P11D form should detail the cash equivalents of benefits and expenses that businesses have provided during the tax year to their directors, and employees earning at the rate of more than £8,500 per year.

Company Car Tax: Petrol or Diesel?

Many of those that drive company cars probably drive a diesel variant. In many cases, those companies with large fleets consider diesel cars to be safer option when it comes to running costs. Diesel cars offer a greater incentive to their petrol counterparts as they produce less CO2, however they currently carry a 3% surcharge over petrol models with similar emissions because they emit greater amounts of harmful particulates to the atmosphere. 

Company Car Tax Calculation Example

Imagine a car has a P11D of £10,000. It has a petrol engine and emits carbon at a rate of 99g/km. The table reveals that its benefit in kind rate is 14% for 2015-2016. This totals £1,400 of the £10,000. The former is added to the employee’s salary – not literally but for calculation purposes – then tax is charged at his/her normal income tax rate. This is 20%, 40% or 45% (depending on income). Therefore, a motorist in the lowest bracket pays £280.

How Much Company Car Tax Will You Pay

How much company car tax you pay is determined by your annual salary. If you pay 20% income tax, you’ll pay 20% of the taxable portion of the car’s P11D value. The same applies if you pay 40% income tax, you will pay 40% on the taxable P11D value. In most instances, this is deducted from your monthly pay. 

To find out exactly how much you will pay, use our free company car tax calculator.

Company Car Tax Bands

The BIK rates for 2015-2016 - 2019-2020 are:

Note: For diesel hybrid powered cars, the 3% diesel surcharge in 2015-2016 does not apply.

Vehicle CO2  
g/km
2015-16
%BIK Rate         
2016-17
%BIK Rate         
2017-18
%BIK Rate         
2018-19
%BIK Rate         
2019-20
%BIK Rate         
Petrol Diesel All fuels All fuels All fuels All fuels
1-50 5 7 9 13 16
51-75 9 11 13 16 19
76-94 13 16 15 17 19 22
95-99 14 17 16 18 20 23
100-104 15 18 17 19 21 24
105-109 16 19 18 20 22 25
110-114 17 20 19 21 23 26
115-119 18 21 20 22 24 27
120-124 19 22 21 23 25 28
125-129 20 23 22 24 26 29
130-134 21 24 23 25 27 30
135-139 22 25 24 26 28 31
140-144 23 26 25 27 29 32
145-149 24 27 26 28 30 33
150-154 25 28 27 29 31 34
155-159 26 29 28 30 32 35
160-164 27 30 29 31 33 36
165-169 28 31 30 32 34 37
170-174 29 32 31 33 35 37
175-179 30 33 32 34 36 37
180-184 31 34 33 35 37 37
185-189 32 35 34 36 37 37
190-194 33 36 35 37 37 37
195-199 34 37 36 37 37 37
200-204 35 37 37 37 37 37
205-209 36 37 37 37 37 37
210-214 37 37 37 37 37 37
215-219 37 37 37 37 37 37
220-224 37 37 37 37 37 37
225-229 37 37 37 37 37 37
230 or above 37 37 37 37 37 37