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Company Car Tax Explained

Company Car Tax Explained

Company car tax can sometimes be pretty hard to understand, especially for those entering into a company car scheme that have not had prior experience of it.  I have put some key points together to try and make it a bit easier to understand.

What is company car tax?

Company Car Tax is a tax that is payable to the government and relates to a determined percentage of your cars P11d value.  The percentage is based around the CO2 emissions of your car.

At this point you are probably confused already because most people understandably don’t know what a P11d value is, which leads me to my next question...

What is a P11d value?

A P11d value is the full list price of the vehicle, including any factory cost options, including VAT.  This figure will not include the cost of Road Fund Licence, First Registration Fee (as charged by the DVLA) or the delivery charge by the manufacturer/main dealer if applicable.

What does CO2 emissions mean?

Every vehicle has a CO2 rating which shows the amount of CO2 that your vehicle emits.  For example, if the vehicle has a CO2 rating of 129 this means that it emits 129 grams of CO2 per kilometre.

Where can I find the P11d value and CO2 rating of my car?

Any reputable leasing company like ourselves will always supply you with a P11d value and CO2 rating when providing a quotation as we fully understand that this plays a big part in the decision of which car you drive.  If you already have your car then the supplying leasing company or dealer will be able to provide you with this information.

What percentage of company car tax would I pay?

Is your salary £32,010 or less?  If so this puts you in the 20% bracket meaning that you will pay 20% of the calculation in company car tax.

If you earn more than £32,010 but less than £150,000 per annum then you are in the 40% bracket meaning that you will pay 40% of the calculation in company car tax.

Lastly, if you are one of the lucky few earning over £150,000 per annum you are in the 50% bracket meaning that you will pay 50% of the calculation in company car tax.  You are probably still a bit confused by ‘the calculation’ part, don’t worry, I will give you an example later.

Does a low-emission car receive any dispensations even if they are not 100% electric?

The answer is simple, yes, a 5% BIK band for cars that emit less than 75g/km in CO2 is now in place but this will be changing in 2015 to cars that emit less than 50g/km.  What does BIK mean I hear you ask? BIK stands for ‘Benefit in Kind’.  Benefit in Kind is any benefit that the employee receives that is not included in their salary, i.e. the company car that you drive.

Are diesel cars more popular with company car drivers?

Yes, generally they are.  The CO2 that a diesel car emits is usually less than the equivalent petrol car so therefore your tax charge should be lower.  Watch out here though because a diesel car is usually more expensive to purchase in the first place which means that the P11d value will be higher than its petrol equivalent.  Make sure that the lower CO2 rating doesn’t get outweighed by the higher P11d value.

Are fully electric cars exempt from company car tax?

Yes, until 2015 that is when the rules may change.

How about Hybrid cars?

Hybrid cars follow the same tax rules as fuel powered cars.  However they do have lower CO2 ratings and therefore sit in a lower tax band and will cost you less in company car tax.

What company car tax will I have to pay?

Below is a table outlining the company car tax bandings based on the CO2 emissions of a car.

Blog / Car Leasing Table

Example Calculation

Ok, so let’s do a little example of how you can roughly work out your company car Tax.

For this example we are going to be driving a car with a P11d Value of £25,000 and a CO2 rating of 130g/km.  If we look at the table above for 2013/2014 we can follow the column down to see that our car falls into the 18% tax banding, I have highlighted this cell red so that you can see where I am looking.  Now that we know that it is an 18% tax banding we can work out the amount based on the P11d Value.

P11d Value - £25,000

Tax Banding % - 18%

18% of £25,000 is £4500.00.

For this example we are going to imagine that we are a 20% tax payer.  We now take the £4500.00 and work out 20% of this to find out the tax we would be charged per annum, in this case £900 or £75 per month.

Hopefully this now makes a little more sense for you but if you have any queries with your next car and the related company car tax please give us a call, we are always happy to help.

The comments above do not necessarily reflect Rivervale's views unless clearly stated.

Car related news
24 July 2013
Written by Matt
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