Calculating the tax

Words By Will Nightingale

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The company car tax itself is calculated according to the car's carbon dioxide (CO2) output, which puts it in a 'benefit-in-kind' taxation band from 10% to 35% - the higher the CO2, the higher the tax rate.

This percentage of the car's P11D value is then subject to the same rate of tax as your income tax - either 20% or 40%, depending on the rate you're on.

This final figure is your annual company car tax: divide this by 12 to find your monthly bill.

When you look at the cost of options, remember to exclude VAT, because your firm's leasing company won't charge this.

That means options come cheaper to you than they would if you were buying the car privately.