The amount of company car tax you pay can be calculated with a simple sum. The P11D value multiplied by the CO2 emission class is called the utility value of the material, often abbreviated as BIK. The government`s current policy is to promote the adoption of electric cars (EVs), so the tax on company cars on zero-emission vehicles is currently extremely low, regardless of your income. In the current 2021/22 tax year, all fully electric cars are entitled to a BiK rate of 1%, which increases to 2% for the 2022/23 tax year. This is a huge subsidy and employees can save thousands of pounds a year if the companies they work for offer electric cars as company cars. Of course, employers also earn because they are charged to Social Security for employees` BiK values. In other words, if you pay less tax, they do. So, the amount of tax to pay on your company car is: (15,000 x 9%) x 20% = £270 Basically, the amount of company car tax you pay depends on a combination of your salary, the cost of the car and the amount of carbon dioxide (CO2) it emits. If you live in England or Wales, the amount of company car tax you pay depends on whether you are a taxpayer on income of 20%, 40% or 45%. You pay HMRC a percentage of £7,500 depending on the income tax rate you pay. in this case, either £1,500, £3,000 or £3,375 per year. You need to be as specific as possible when filling out your tax, but there are things you can do to reduce the amount of company car tax you pay. By definition, a company car belongs to your employer.
There is no concept of company cars – and therefore no tax on company cars to pay – if you are self-employed as a sole proprietor. This is because there is no legal difference between you and your company. Like the company car tax, the WLTP measures replaced the NEDC CO2 values for motor vehicle tax (excise duty on vehicles) in the past financial year. A company car can be a great advantage. Just make sure you know the tax implications of a company car. For each make, model and type of car, the above calculation is applied. Take, for example, a petrol-powered BMW 3 Series that has a P11D value of £30,000 and falls into the BiK band by 25% due to CO2 emissions of 105g/km of CO2. The value of the car for company car tax purposes is £7,500 (25% of £30,000). You pay taxes if you or your family use a company car privately, even for travel. If your company car has CO2 emissions from 1 to 50 g/km, the value of the vehicle is based on its zero mileage or “electric range”.
This is the distance that the car can travel electrically before its batteries need to be charged. The calculation of your fuel benefit tax is based on a “multiplier” defined by HMRC for the BiK percentage of your company car. The multiplier is currently £23,400, so for our fictional BMW 3 Series example above, you`ll need to multiply the car`s 25% BiK rate by £23,400, resulting in a figure of £5,850. HMRC considers the private use of a company car – including commuting – as a benefit and describes it as a benefit in kind (BiK). This essentially indicates that you are getting a financial benefit from your employer that is not part of your salary, so HMRC tries to tax it separately (although it is still deducted from your monthly salary “at source”). If, as an employer, you provide company cars or fuel for your employees` private use, you must determine the tax value in order to report it to HM Revenue and Customs (HMRC). These low tariffs have also been applied retroactively to electric company cars registered before 6 April 2020, as well as hybrid cars registered after that date that emit less than 50 g/km of CO2 and can achieve a fully electric range of 130 miles (currently, there are no hybrid models in the UK that meet these criteria). A company car is likely to be renewed every few years and it is possible that maintenance and repairs are covered by the company to protect you from unexpected bills and hassles.
If you opt for a car allowance, you are not limited to the list of cars offered by the company and can pay directly for the ownership of the car or buy a used car. Financial contributions to your company car system reduce your BiK rate, while employees who use their car part-time are also liable for less BiK tax. To find out how much of a company car tax reduction you are entitled to, use the company car tax calculator on the HM Revenue & Customs website: www.gov.uk/calculate-tax-on-company-cars To calculate the amount of tax you pay on your company car, you must: You can see how much tax you can pay using the HMRC company car calculator and fuel benefits. To help you determine the BiK rate for your car, we have listed the prices of cars registered after April 6, 2020 and those registered before that date. Note that the tax rates for company cars are updated every year, so the percentage of BiK you pay this year will be slightly different next year. To find out how much tax on company cars you have to pay, HMRC will first look at the amount of CO2 emitted by your car. This falls into one of the 18 emission bands mentioned above. The amount of tax you pay on your company car depends on variable factors. It uses driving data to assess performance on the road and calculates fuel efficiency to see how much CO2 is emitted. Inform HM Revenue and Customs (HMRC) if your car or fuel details change. You can check or update your company car tax online, for example: It can be confusing to understand and calculate it, but this comprehensive guide can help you understand the amount of tax you need to pay to help you decide which is the cheapest company car. For the best company cars you can buy in 2021, check out our list of the best company cars, or if your other car isn`t a company car, check out our car tax guide for owners.
The tax is calculated by multiplying the P11D value of the company car, which is the sum of the list price, shipping costs, VAT and optional extras (but excluding car tax or first registration fees) by a BiK rate. Any car offered for sale theoretically falls into one of the BiK bands, as they are based on CO2 emission values. A company car is a valuable advantage and choosing one can be very exciting. However, the potential tax implications need to be carefully considered. Choosing the wrong car can be a costly mistake. You pay taxes on the value of the company car, which depends on its cost and the type of fuel it consumes. From the 2023/24 tax year, biK rates must be merged and realigned after the full implementation of the WLTP emissions test. Drivers of older diesel vehicles will continue to receive a 2% surcharge on their company cars unless they meet the latest RDE2 test criteria, which all new cars must do.
These factors include the amount you earn each year, the co2 emission class of the vehicle, and the vehicle`s P11D score. Let`s say your company car has a P11D value of £15,000. They discovered this using HMRC`s company car and fuel utility ecu. A company car may no longer be the de facto signifier of the status it once was, but fleet sales account for about half of the new car market in the UK, and while not all of these company cars are driven for both professional and personal use, it`s clear that companies and employees still see them as a valuable benefit. Let`s say you have to choose between two jobs. One that offers great advantages and the other that offers the same great advantages plus a company car. It`s an easy choice, right? You will do the work by car. Find out about the company car tax if you are an employee. BiK percentage ranges were originally based on company car values, so drivers of expensive models were taxed more heavily. Today, BiK rates are grouped into bands based on a company car`s CO2 emissions, so the less polluting pay less under government policy to encourage motorists to adopt greener cars. Electricity supplied to charge a corporate electric vehicle, whether at home or in the office, is not currently taxed as a benefit by HMRC. If you are an employee, your employer will deduct all taxes on company-owned vehicles owed to HMRC at source.
Similarly, you must deduct the tax on company cars at source if you are self-employed but acting as a limited liability company. If you use company-supplied fuel for personal miles – including commuting – HMRC will also tax you on this benefit. .