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How is company car tax calculated?

If your employer provides you with a car then here's how to calculate your tax bill...

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Company car tax is a complicated thing. How much you pay depends on all sorts of factors, including the value of the car, its emissions, your tax rate, the cost of any options fitted to the car, and the date the car was registered. It gets more fiddly if you run a plug-in hybrid, as the vehicle's all-electric range also influences how much you pay.

But in essence, it boils down to this: the more expensive the car, and the higher its CO2 emissions, the more you pay. The lower the price, and the lower its CO2 emissions, the smaller the tax bill.

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Calculating company car tax

To work out what your tax bill will be, you need to know a few facts. To start with, you'll need the car's P11d value. Named after the tax form the value is required for, the P11d value is the list price including VAT, delivery charges, and the cost of options, but excluding the first registration fee and the first year's car tax (Vehicle Excise Duty) payment.

Next, you'll need to know the car's CO2 emissions in g/km. This may vary depending on the car's equipment levels. For example, specifying larger alloy wheels could be enough to push a car into a higher tax band.

You'll also need to know the rate at which you pay income tax, as the taxable value of the company car is treated like part of your salary. At the time of writing, an income of £12,501-£50,000 is taxed at the basic rate of 20%. A salary of £50,001-£150,000 is taxed at 40%, while income of £150,001 and over is taxed at 45%.

Company car tax bands

Tax bands for company cars vary depending on whether a car was registered before or from 6 April 2021. That's because official emissions figures for cars registered from 6 April 2020 onwards are based on the tougher and more accurate WLTP standard, so an identical car will have two different CO2 figures depending on when it was registered.

The full list of tax bands is below:

Company car tax bands from 6 April 2020 

CO2 emissions g/km...

Electric range...

 2020-21...

2021-22...

2022-23...

0

n/a

0

1

2

1-50

>130 miles

0

1

2

1-50

70-129 miles

3

4

5

1-50

40-69 miles

6

7

8

1-50

30-39 miles

10

11

12

1-50

<30 miles

12

13

14

51-54

 

13

14

15

55-59

 

14

15

16

60-64

 

15

16

17

65-69

 

16

17

18

70-74

 

17

18

19

75-79

 

18

18

20

80-84

 

19

20

21

85-89

 

20

21

22

90-94

 

21

22

23

95-99

 

22

23

24

100-104

 

23

24

25

105-109

 

24

25

26

110-114

 

25

26

27

115-119

 

26

27

28

120-124

 

27

28

29

125-129

 

28

29

30

130-134

 

29

30

31

135-139

 

30

31

32

140-144

 

31

32

33

145-149

 

32

33

34

150-154

 

33

34

35

155-159

 

34

35

36

160-164

 

35

36

37

165-169

 

36

37

37

170 or more

 

37

37

37


Cars registered before 6 April 2020

CO2 emissions g/km...

Electric range...

2020-21... 

2021-22...  

2022-23...

0

n/a

0

1

2

1-50

>130 miles

2

2

2

1-50

70-129 miles

5

5

5

1-50

40-69 miles

8

8

8

1-50

30-39 miles

12

12

12

1-50

<30 miles

14

14

14

51-54

 

15

15

15

55-59

 

16

16

16

60-64

 

17

17

17

65-69

 

18

18

18

70-74

 

19

19

19

75-79

 

20

20

20

80-84

 

21

21

21

85-89

 

22

22

22

90-94

 

23

23

23

95-99

 

24

24

24

100-104

 

25

25

25

105-109

 

26

26

26

110-114

 

27

27

27

115-119

 

28

28

28

120-124

 

29

29

29

125-129

 

30

30

30

130-134

 

31

31

31

135-139

 

32

32

32

140-144

 

33

33

33

145-149

 

34

34

34

150-154

 

35

35

35

155-159

 

36

36

36

160 or more

 

37

37

37

Diesel cars which don't meet the RDE2 standard (an on-the-road assessment to guard against rules swerving in the WLTP lab-based tests) are subject to a 4% surcharge. However, since the beginning of January all new cars have had to meet this standard, so it will only apply to older vehicles.

Working out a tax bill

Let's work through an example.

At the start of the 2021/22 tax year, let's say your employer is going to hand you the keys to a car with a P11d value of £30,000, and CO2 emissions of 150g/km. You're in the 40% income tax bracket.

The car is in the 34% tax band, so the taxable benefit is £10,200 (34% of £30,000). You pay tax at 40%, so your annual benefit-in-kind (BIK) tax bill is £4080 (40% of £10,200). Each month, that means £340 will be taken from your salary as tax for running the company car (£4080 divided by 12).

To understate company car tax in more detail, read our company car tax guide.


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