Company Car Tax Explained

What is company car tax?

If a business provides its employees with a car for business and personal use, it will be subject to company car tax.

If you receive a car via a company car scheme, the benefit received in the form of the car you have use of is taxed as a benefit-in-kind (BiK).

What is BiK tax or benefit-in-kind tax?

Benefit-in-kind tax refers to a benefit that employees get from their employer. BiK tax is essentially what is referred to as company car tax – it’s referred to as such because HMRC view the company car as a benefit outside of usual work equipment so you have to be taxed on that benefit.

How does company car tax work?

The amount of tax you pay on your company car will depend upon the vehicle you drive.

The company car tax rate is calculated based on the carbon dioxide emissions and the type of fuel the car uses. It will also depend on the value of the car. Generally, the higher the CO2 emissions your company car emits and the higher the price of your car, the higher the benefit-in-kind tax will be.

To calculate your car benefit charge, you multiply the taxable list price of your vehicle (including accessories) by the relevant CO2 percentage and then multiple the result by your personal tax band.

Please note that the value of any personal contributions you make should be deducted from the value of the taxable list price.

Please contact us for details on electric vehicles.

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