Company car tax is designed to do two things. Firstly, to reflect the benefit of you having an employer-provided car for your private use. And secondly, to encourage you to choose a more environmentally-friendly vehicle.
With road transport responsible for about 20% of all emissions, the Government is committed to encouraging drivers to choose greener vehicles. That’s why the amount of company car tax you have to pay is directly related to the amount of CO2 produced by your car (measured in grams per kilometre – g/km).
How company car tax works
You pay company car tax on a percentage of the P11D value of your car.
The P11D value is the manufacturer’s list price, plus VAT, delivery, number plates and any optional extras.
The percentage of the P11D value you pay tax on is decided by the CO2 emissions of your car and fuel type. To find your emissions figure, you can either look at the car's vehicle registration certificate, or use an official guide, available from the Vehicle Certification Agency (www.vca.gov.uk).
Once you know your car’s CO2 emissions and have worked out its P11D value, multiply it by the appropriate tax percentage from the above table. You will pay tax on the result at your marginal rate (20% or 40% in 2017/18). This is normally deducted every month from your salary.
Diesel cars and your tax bill
Diesel engines produce less CO2 than petrol engines, so your actual company car tax bill should be smaller than it would be from an equivalent petrol model. But other factors may offset this and make diesels just as expensive overall.
For a start, diesel models usually cost more than their petrol equivalents, so you have to make sure the higher P11D price doesn't outweigh any advantage from its lower tax band.
Diesel fuel, in general, can cost more at the pumps than petrol, too, so you need to meet the predicted fuel economy figures from the manufacturer to really benefit.
And finally, diesel company cars are subject to a 3% charge added to their tax band because of concerns about particulates and other ‘local’ pollutants emitted from the exhaust.
The 'free' fuel benefit
You may face further tax if your employer provides 'free' fuel for private motoring. This could be because you use a company fuel card, for example, and don’t repay the private usage element, or because your employer pays for travel between home and work.
The tax payable on the ‘free’ fuel benefit is based on the Government fuel scale charge of £22,600 in 2017/18, multiplied by the appropriate percentage for your car derived from the CO2 table above. The result is then multiplied by your marginal tax rate to derive the annual tax due.
Haynes Brothers Limited
Haynes House 23 Ashford Road, Maidstone,
Registered in England No. 00048511
Main Switchboard: 01622 625525
New Car Sales: 01622 625508
Used Car Sales: 01622 625559
Car Service Bookings: 01622 625561
Ford Parts Department: 01622 625535
Accident Repair Centre: 01622 755726
Accounts Department: 01622 625502