How Much Will My Company Car Tax Be

Company car tax, or benefit-in-kind (BIK) tax, applies to anyone that is entitled to personal use of a company vehicle. In most cases this is likely to be a company car or van but could also apply to a company pool car or hire cars paid for by your employer, if you use them for personal trips – including commuting.

How is company car tax calculated?

Company car tax is based on the value of the car, the amount of CO2 it emits and your income tax band. For the purposes of calculating company car tax, you need to know the P11D Value of your company car. Essentially, this is the list price of the car, including any optional extras, accessories and VAT, but excluding the first-year registration fee and VED.

Note: The P11D value cannot include any manufacturer discounts or the plug-in car grant.

You'll also need to know what BIK band your car sits in. The bands are published by HMRC and are based on CO2 emissions (and electric range for hybrids). You can view them in the section below.

The BIK band dictates what percentage of the P11D value you'll be taxed – known as the BIK value - but the amount you'll actually pay is based on your income tax banding. As an example, the Volkswagen Golf 1.5 TSI Style has a P11D value of £25,315 and emits 125g/km of CO2, putting it in the 29% BIK band. Therefore, the BIK value is £25,315 x 29% = £7,341.

To get the amount you'll be charged in company car tax per year, you multiply the BIK value by your income tax band. A base rate (20%) taxpayer will pay £7,341 x 20% = £1,468 per annum. For a 40% taxpayer, the calculation is £7,341 x 40% = £2,937 per annum.

Company car tax is paid monthly, therefore dividing the figure by 12 will provide the monthly cost. You can also find the company car tax costs for all available new cars using the Fleet News company car tax calculator at our sister site.

What are the current company car (BIK) tax bands?

The table below outlines the company car tax bands for the current tax year and the next three years. The bands are based on your car's CO2 emissions (and electric range for hybrids). These bands apply to vehicles registered after 6 April 2021.

CO2 (g/km)	Electric range (miles)	2021-22 (%)	2022-23 (%)	2023-24 (%)	2024-25 (%)
0	N/A	1	2	2	2
1-50	>130	1	2	2	2
1-50	70-129	4	5	5	5
1-50	40-69	7	8	8	8
1-50	30-39	11	12	12	12
1-50	<30	13	14	14	14
51-54		14	15	15	15
55-59		15	16	16	16
60-64		16	17	17	17
65-69		17	18	18	18
70-74		18	19	19	19
75-79		19	20	20	20
80-84		20	21	21	21
85-89		21	22	22	22
90-94		22	23	23	23
95-99		23	24	24	24
100-104		24	25	25	25
105-109		25	26	26	26
110-114		26	27	27	27
115-119		27	28	28	28
120-124		28	29	29	29
125-129		29	30	30	30
130-134		30	31	31	31
135-139		31	32	32	32
140-144		32	33	33	33
145-149		33	34	34	34
150-154		34	35	35	35
155-159		35	36	36	36
160-164		36	37	37	37
165-169		37	37	37	37
170+		37	37	37	37

For older cars (registered before 6 April 2021), different rates apply.

Are there company car tax discounts for electric and hybrid cars?

The BIK rates shown in the table above apply to all vehicles registered after 6 April 2021. Last year, the Government applied a 0% BIK rate for electric cars such as the Vauxhall Mokka-e (below), but this increased to 1% as of 1 April 2021.

What about diesels - do I have to pay extra?

A 4% surcharge applies to any diesel car that does not meet the latest Euro 6d emissions standards – known as RDE2 compliance. The surcharge is applied to the BIK band, so a car that falls into the 24% band would be pushed up to 28%. All cars sold after 1 January  2021, must comply with RDE2, however, so the surcharge will only apply to older vehicles.

How does company car tax compare with salary sacrifice or cash alternative schemes?

Unlike company car schemes, where the company pays for the car, in salary sacrifice arrangements you pay for the car by 'sacrificing' some of your pre-tax salary. A salary sacrifice car can still be eligible for BIK tax. A driver will be taxed on whatever the greatest is between:

• > the Income Tax due on the amount of salary sacrificed on the finance rental of the vehicle, or
• >the Benefit in Kind (BIK) charge on the car

For cars with CO2 emissions of less than 75g/km the benefit in kind rules automatically apply. Making electric and plug-in hybrid cars more financially attractive. You can find out more about salary sacrifice on Parkers.

For those offered a cash alternative, the situation is similar – if you receive an additional £6,000 per year in lieu of taking a company car with a BIK of, say, £3,560, you will be taxed for the full £6,000 – and a corresponding increase in National Insurance, plus a potentially higher tax bracket on that income may apply.

In other words, you're going to be taxed on the benefit you actually receive, be it income or vehicle, but can potentially still save by opting for a vehicle with 75g/km or lower emissions.

How much tax will I pay for having a company van?

We have a full guide to van tax available on a separate page, but the good news about company vans is that everything is charged at a fixed rate.

What's more, you'll only pay BIK on a van if you have personal use of it. You are allowed 'reasonable' use of a van before you have to pay BIK, but this means only taking it home if you've got a early start in the morning, and limiting personal-use journeys to a short detour to pick up a newspaper or similar. BIK will be applied if you use a van for the weekly supermarket shop, for instance.

The current van BIK rate is £3,500, and the amount you pay is calculated by multiplying that by your income tax banding. This works out at £700 per year at the 20% rate or £1,400 per year at the 40% rate.If lots of people share the van, the BIK cost can be divided between them.

The same rules apply to pickups.

The Parkers guide to van and pickup tax

Familiar company car tax terms

Benefit in kind (BIK): this is any benefit which employees receive from employment but are not included in a salary. The obvious example in our case is company cars, which are taxed according to the income of the employee.

Emissions: the amount of gas the car emits from the exhaust. Measured in terms of CO2 for company car tax purposes.

g/km: the level of carbon dioxide emitted by a car is measure in grams per kilometre.

P11D: this is the form that each employer must fill in annually and send to the tax office.

P11D value: this is the value of your car calculated by including RRP, VAT, delivery and any extras (such as metallic paint or satellite navigation). It does not include road tax or first registration fee.

Personal tax allowance: this is a sum of money that you're allowed to earn without being taxed upon it - currently £10,600.

Further reading

Company cars news and advice

How Much Will My Company Car Tax Be

Source: https://www.parkers.co.uk/company-cars/tax-guide/

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