Company car tax explained - How company car tax is calculated

You are liable for company car tax if your company provides a car for your or your household's private use - and your daily commute to and from work is categorised as private use.

Since 2002, company car tax has been based on the list price of the car, its options and its recorded carbon dioxide emissions, rather than the number of miles covered, in a bid to encourage drivers to opt for more eco-friendly machinery.

Tax is worked out on a sliding scale, with drivers of gas-guzzlers being hit harder than those in more frugal vehicles.

There are exemptions and adjustments for vehicles using, for instance, biofuel, but as a general rule every company car driver incurs a liability of between 15% and 35%.

It's easy to find out which vehicles fall into which category - simply log on to whatcar.com where the information is listed against each car, or browse the data pages of What Car? magazine.

The figures listed are for petrol engines. Diesels attract a 3% surcharge, as the Government says these cars cause more non-carbon dioxide pollution.

How to work out your tax bill
• 1.    Work out your car's P11D price (the list price including options, minus the first registration fee and the annual VED road tax rate).
• 2.    Work out the percentage tax liability of your car, based on carbon dioxide emissions.
• 3.    Multiply the P11D price by the percentage tax liability.
• 4.    Multiply this figure by your personal tax rate (either 22% or 40%).
This figure is what you pay annually in tax.

To save some time, you can use whatcar.com's company car tax calculator by clicking here.