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If you need some help finding the right company car that makes the most financial sense to you, then Pure Vehicle Leasing’s guide to company car tax is a great place to start.

If you are a company car driver and use the vehicle for personal reasons including to and from work it is deemed a benefit in kind (BIK) and you could be taxed for the privilege.

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How is it calculated?

Her Majesty’s Revenue and Customs (HMRC) sets a taxable value for each new car based on the ‘P11D value’ which is calculated using the car’s list price – plus VAT, delivery and any additional options such as metallic paint.

The BIK rate is a percentage of the car’s P11D value, determined by how much CO2 it emits. The higher the CO2 emissions the more the tax that you will pay.

Lastly how much you earn and therefore what tax bracket you’re in will complete the calculation. If you are a 20% tax payer, then you will pay 20% of your company cars BIK rate. We have included an example below as well as a handy company car tax table to help calculate your BIK.

Example

We’re going to look at the Ford Mondeo 1.5 TDCi ECOnetic Manual with a P11d value of £21,390. This model is diesel and has CO2 emissions of 94 grams per kilometer meaning for the 2016/17 tax year it will have a BIK rate of 18%.

Example

 

The amount of tax that you will actually pay will depend on the income tax bracket that you sit in, so based on the above you would pay £3,850.20 x (your tax bracket):

Example 2

Our Tip – The above rates are based on the 2016/17 tax year and the BIK rates are set to increase year on year until 2020 at least, so take this into account when you decide on your next company car. In 2016/17 the diesel surcharge was due to be removed but this has now been delayed until 2020/21.

% of P11D 2016/17 CO2 (g/km) 2017/18 CO2 (g/km) 2018/19 CO2 (g/km) 2019/20 CO2 (g/km)
7 0-50 N/A N/A N/A
9 N/A 0-50 N/A N/A
10 N/A N/A N/A N/A
11 51-75 N/A N/A N/A
12 N/A N/A N/A N/A
13 N/A 51-75 0-50 N/A
14 N/A N/A N/A N/A
15 76-94 N/A N/A N/A
16 95-99 N/A 51-75 0-50
17 100-104 76-94 N/A N/A
18 105-109 95-99 N/A N/A
19 110-114 100-104 76-94 51-75
20 115-119 105-109 95-99 N/A
21 120-124 110-114 100-104 N/A
22 125-129 115-119 105-109 76-94
23 130-134 120-124 110-114 95-99
24 135-139 125-129 115-119 100-104
25 140-144 130-134 120-124 105-109
26 145-149 135-139 125-129 110-114
27 150-154 140-144 130-134 115-119
28 155-159 145-149 135-139 120-124
29 160-164 150-154 140-144 125-129
30 165-169 155-159 145-149 130-134
31 170-174 160-164 150-154 135-139
32 175-179 165-169 155-159 140-144
33 180-184 170-174 160-164 145-149
34 185-189 175-179 165-169 150-154
35 190-194 180-184 170-174 155-159
36 195-199 185-189 175-179 160-164
37 200+ 190+ 180+ 165+

Fuel Benefit

Some drivers will have the option to take private use fuel paid for by their employer usually in the form of a fuel card. This benefit is taxable and, like a company car itself, the amount you pay is determined in part by the CO2 emissions of the car. It is important to Calculate whether or not it is actually worthwhile to take free fuel as you can potentially pay more tax than if you paid for the fuel yourself.

The taxable amount is based simply on £22,200 for the 2016/17 tax year multiplied by the same percentage as the car benefit, derived from the CO2 figure and fuel type.

Example

So based on the same Ford Mondeo 1.5 TDCi ECOnetic Manual which emits 94g/km of CO2 and a BIK tax band of 18% your fuel benefit will be:

Example 3

 

The amount of fuel tax that you will actually pay will depend on the income tax bracket that you sit in, so based on the above you would pay £3996 x (your tax bracket):

Example 4

Our Tip – Take into consideration that each year the bands go up for both company car and fuel tax. It’s worth considering your mileage and how much you will spend on fuel as it may be better to opt out of the fuel benefit.

PLEASE NOTE – These figures are for illustration only and will need to me checked with your accountant or the HMRC website.

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