Company car tax rates

Everything you need to know about company car tax (BIK) rates, tax tables, and the best cars to buy

BuyaCar team
Nov 14, 2018

Just as there's no such thing as a free lunch, a free car doesn't exist either - especially if it's provided by your employer.

Whether a vehicle is essential to your job or not, it's seen as a benefit or perk by the taxman and, as a result, attracts tax. That's why a company car is known as a benefit-in-kind (BIK).

Scroll down for details of company car tax rules, including how to calculate the amount you will be charged and a full table of tax bands, showing how diesel, petrol and electric cars compare. 

We also look at the best company cars available and there's a glossary at the bottom if you need further explanation.

 

Company car tax basics

You will have to pay tax on cars that are supplied by your employer or bought with an allowance it provides. This means pool cars or hire cars are excluded.

The tax is only calculated on a proportion of the car's list price (before any discounts) when new - known as its P11D value. For this reason, it's less than you would pay if you were buying and running your own vehicle.

The precise share that you have to give up in tax is calculated in a way that promotes greener cars. So the higher your vehicle’s carbon dioxide (CO2) emissions, the more you’ll pay in company car tax.

Health concerns over diesel vehicles and their higher levels of toxic emissions mean that these attract a higher rate of tax. Also, irrespective of whether you opt for a petrol, diesel or electric car, your personal tax band contributes to how much you pay.

 

Calculating company car tax

1. The car’s value
In almost every case, the starting point is the list price of a car when it was new. It doesn’t matter whether it's brand new or second hand, and discounts are disregarded too. The tax is based on the recommended retail price when it was first registered.

Any additional options that were fitted are added to this price, which also includes VAT but not car tax. As mentioned above, this price is often known as the car’s P11D value - named after the tax form used by employers to document company car benefits.

2. CO2 emissions
Each year you pay tax on a proportion of a car’s list price, known as its taxable value. The size of this depends on the amount of CO2 it produces from its exhaust.

There are 20 CO2-based tax bands, which are shown below. The lower the CO2, the lower your tax band. Owners of cars that emit little to no CO2 (such as electric and hybrid vehicles) pay tax on 9 per cent of their value. For those with the most polluting vehicles, that proportion can be as high as 37 per cent.

The current bands apply to all modern cars - not just those built this year - and tax generally increases each year: if your taxable value is 20% now, it will be 23% next year, for example.

3. Fuel
 In all but the top three bands,  diesel cars have a company car tax rate that’s 4 per cent higher than other vehicles. Electric cars were previously exempt but are now subject to company car tax - at the lowest rate.

4. Your personal tax rate
 The final stage in calculating your company car tax is applying your income tax rate to the car’s taxable value.

 

Calculating company car tax: example

1. The car's value
Buy a brand new petrol car costing £9,000 and add £1,000-worth of additional equipment
Its P11D value is therefore £10,000

2. CO2 emissions
The car emits 103g/km of CO2. Based on the tax band table, this means that the company car tax rate is 21%
Your car’s taxable value, based on 21% of its brand new cost is therefore £2,100

3. Fuel
As it's a petrol car, the tax rate remains at 21%. The rate for diesel cars is 4% higher

4. Your personal tax rate
 
Your income tax rate is applied to the taxable value. In this example, we're assuming a rate of 20%.
20% of £2,100 = £420: your final tax bill

 

Company car tax bands table

CO2 emissions (g/km)

2018/19 taxable value

2019/20 taxable value

0-50

13% (Diesel: 17%)

16% (Diesel: 20%)

51-75

16% (Diesel: 20%)

19% (Diesel: 23%)

76-94

19% (Diesel: 23%)

22% (Diesel: 26%)

95-99

20% (Diesel: 24%)

23% (Diesel: 27%)

100-104

21% (Diesel: 25%)

24% (Diesel: 28%)

105-109

22% (Diesel: 26%)

25% (Diesel: 29%)

110-114

23% (Diesel: 27%)

26% (Diesel: 30%)

115-119

24% (Diesel: 28%)

27% (Diesel: 31%)

120-124

25% (Diesel: 29%)

28% (Diesel: 32%)

125-129

26% (Diesel: 30%)

29% (Diesel: 33%)

130-134

27% (Diesel: 31%)

30% (Diesel: 34%)

135-139

28% (Diesel: 32%)

31% (Diesel: 35%)

140-144

29% (Diesel: 33%)

32% (Diesel: 36%)

145-149

30% (Diesel: 34%)

33% (Diesel: 37%)

150-154

31% (Diesel: 35%)

34% (Diesel: 37%)

155-159

32% (Diesel: 36%)

35% (Diesel: 37%)

160-164

33% (Diesel: 37%)

36% (Diesel: 37%)

165-169

34% (Diesel: 37%)

37% (Diesel: 37%)

170-174

35% (Diesel: 37%)

37% (Diesel: 37%)

175-179

36% (Diesel: 37%)

37% (Diesel: 37%)

180-184

37% (Diesel: 37%)

37% (Diesel: 37%)

185-189

37% (Diesel: 37%)

37% (Diesel: 37%)

190 or more

37% (Diesel: 37%)

37% (Diesel: 37%)

 

Company car tax: petrol or diesel

Deciding on whether to choose a petrol or diesel company car boils down to one simple question: how many miles will you be doing?

Despite higher company car tax and plummeting diesel sales suggesting otherwise, motorists who will be spending a large proportion of their time going up and down the motorway will be better off with a diesel, as they can still make savings thanks to higher fuel economy. Those who will only be making short journeys would be best served with a petrol, hybrid or electric car.

As company cars tend to only last a few years, forthcoming clean air zone charges won't affect most diesel company car drivers. However, if your vehicle was on the road before September 2015, there is a chance that it doesn't comply with the latest emissions standards and you'll be liable for daily charges if you drive into the centre of cities including London and Birmingham.

 

Best company cars 

Best hybrid company car

Hyundai Ioniq PHEV

Latest Hyundai Ioniq PHEV deals from £22,999
Finance from £327 per month

The Hyundai Ioniq PHEV is a great all-round car and thanks to CO2 emissions of just 26g/km it qualifies for the lowest company car tax band – being a hybrid its economy is great too. The model range is small, but all come well equipped with modern features such as Apple CarPlay for easy contrl of phone apps through the car's touchscreen, and adaptive cruise control which controls the car's speed to maintain a set distance between the vehicle in front.

 

Best electric company car

Nissan Leaf

Latest Nissan Leaf deals from £10,480
Finance from £185 per month

The Nissan Leaf is fully electric so produces 0g/km of CO2 and like the Hyundai above, sits in the lowest company car tax band. With a claimed range of 168-miles, 99 per cent of the population should have enough battery power, to complete their commute to work stress free. The Leaf also comes packed with tech such as Nissan’s epedal (a system which removes the need to use a brake pedal), Apple CarPlay and cruise control.

 

Best petrol company car

Mini Countryman

Latest Mini Countryman deals from £8,990
Finance from £137 per month

A taller, larger and wider version of the standard Mini Hathcback, this Mini Countryman is a dsigner alternative to cars such as the Nissan Qashqai. It's got great build quality, good ride on UK roads and, should you find yourself on a twisty stretch of tarmac, it's relatively good fun to drive, too. The 1.5-litre petrol engine and six speed manual gearbox pair nicely with Mini’s image of fun motoring.

 

Best diesel company car

Volvo XC40

Latest Volvo XC40 deals from £25,995
Finance from £345 per month

Volvo’s Swedish approach to motoring has taken the car world by storm as of late. Not only do its cars all look great, but they are safe, comfortable and incredibly practical. This is all true of the Volvo XC40, which is the car makers smallest SUV. A hybrid model is expected, but for now you can opt for either a diesel or petrol. A D3 spec diesel with an automatic gearbox is one of the sweeter spots for company car drivers.

 

Company car tax: key terms explained

Benefit-in-kind the government views things such as cars, accomodation and loans provided by your employer in a similar light to getting paid more money. So these benefits-in-kind are taxed.

CO2 emissions A by-product of burning fuel is CO2. The more you burn, the more fuel you use and the more CO2 is emitted from your exhaust. The less a car emits the better it is for the environment, so the less HMRC will tax you.

Company car tax band Based on the amount of CO2 your car emits and the fuel it uses, it will fall into a company car tax band. The bands are decided by the UK government and help calculate how much tax you will owe for running a company car.

Hybrid vehicle A car that uses two power sources, such a battery and petrol engine.

List price This is the price a manufacturer lists the car as and not the price you pay at a dealer. It doesn’t matter if you negotiate a cracking deal or not, the value HMRC will base how much tax you owe is the list price of the car. This doesn’t include vehicle excise duty or its registration fee.

P11D value This is the list price of your company car plus the cost of any optional extras such as an uprated stereo system. It is named after a form used by your employer to tell HMRC about company car benefits

Personal tax rate This is the tax you pay based on your salary/income.

Pure electric car A car that is purely powered by electricity.

Taxable value The proportion of your car's list price that you pay tax on. The vehicle's CO2 emissions dictate the size of this proportion.

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