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Company Car Tax Advice
Driving a company car can be a great perk for any job, but how do you figure out the cost of tax?
Find out how company car tax works in our comprehensive guide.
If you earn more than £8,500 a year and use a company car for private purposes, you’ll have to pay tax on it – even if a member of your family or household drives it.
The amount of tax depends on:
• The car’s price
• CO2 emissions
• Fuel type
• Age
• Payment – loan or lump sum?
• Whether you make payments for private use of the car
• How many days the car is unavailable (per year)
The more eco-friendly the car, the less tax you’ll have to pay. And the maximum tax rate you can pay on any car is 35 per cent.
A ten per cent band exists for cars which emit 120g/km of CO2 or less, and a nine per cent band for electric vehicles. Diesels have three per cent extra tax added to their final tax cost whereas hybrids receive a three per cent subtraction.
Sometimes fuel costs are paid for by the company – if so, this is also taxable.
How to calculate your tax
1. Add up the car’s list price and the cost of any extras
2. Subtract any financial contributions you’ve made towards the cost of the car
3. Depending on your car’s emissions you’ll be given a percentage (remember to include any special reductions with this)
4. Multiply this by the total amount from step 2
5. Multiply this with the amount of days the car was unavailable, then divide the total by 365
6. Subtract this figure from the amount in step 4
7. Subtract any payments which you made towards private use of the car
Budget 2008 changes
• The CO2 emissions figure which determines the 15 per cent rate for petrol has a lower threshold of 135g/km. From April 2010 this will be further reduced to 130g/km
• Biofuel-powered cars which run on a mixture of E85 bioethanol and 15 per cent petrol receive a two per cent tax reduction
For more technical information about company car tax, call the HM Revenue and Customs on 0845 7143 143 or visit their HM Revenue and Customs company cars facts page.
For everything you need to know about car tax, including tax bands, prices and exemptions, read our car tax guide.
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