Company car tax rates

How to calculate company car tax (BIK) rates and cut your bill

BuyaCar team
Jul 25, 2017

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).

The rules apply to cars that are supplied by the company or bought with an allowance, and which can be used both for work and personally. They don't apply to pool cars or hire cars.

The tax is only calculated on a proportion of the car's price 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 mean that these attract a higher rate of tax. The amount also depends on the cost of the car when new and your tax band.

 

How company car tax is calculated

1. The car’s value In almost every case, the starting point is the list price of a car when it was new. It may have been bought with a discount as part of a new car deal, it might be several years-old or purchased second-hand. It doesn’t matter - the tax is based on the list 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. The list 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 part of a car’s list price, known as its taxable value. How big this part is depends on its company car tax band.

Cars that emit little CO2 fall into a low tax band. If you have a really efficient car, you'll pay tax on just 9% of its value. For a car that emits huge quantities of CO2, then that proportion can be as high as 37%. There are 30 bands in total, shown in a table below. They are tweaked every year.

The current bands apply to all modern cars - not just those built this year. One year you may pay tax on 20% of a car's value, but you may find yourself paying it on 22% next year.

3. The fuel your car uses In most bands, diesel cars have a company car tax rate that’s 3% higher than other vehicles.

4. Your personal tax rate Your final company car tax bill is calculated each year by by applying your income tax rate to the car’s taxable value.

  

Company car tax: example

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

2. CO2 emissions The car emits 103g/km CO2. Based on the tax band table, this means that the company car tax rate is 19%
Your car’s taxable value, based on 15% of its brand new cost is £1,900

3. Fuel As it's a petrol car, the tax rate remains at 19%. The rate for diesel cars is 3% higher this tax yer and 4% greater from April 2018.

4. Your personal tax rate You pay 20% income tax on your earnings. This is applied to the taxable value.
Your final tax bill is £380.

 

Company car tax table

CO2 emissions (g/km)

2017/18 taxable value

2018/19 taxable value

2019/20 taxable value

0-50

9% (Diesel: 12%)

13% (Diesel: 17%)

16% (Diesel: 20%)

51-75

13% (Diesel: 16%)

16% (Diesel: 20%)

19% (Diesel: 23%)

76-94

17% (Diesel: 20%)

19% (Diesel: 23%)

22% (Diesel: 26%)

95-99

18% (Diesel: 21%)

20% (Diesel: 24%)

23% (Diesel: 27%)

100-104

19% (Diesel: 22%)

21% (Diesel: 25%)

24% (Diesel: 28%)

105-109

20% (Diesel: 23%)

22% (Diesel: 26%)

25% (Diesel: 29%)

110-114

21% (Diesel: 24%)

23% (Diesel: 27%)

26% (Diesel: 30%)

115-119

22% (Diesel: 25%)

24% (Diesel: 28%)

27% (Diesel: 31%)

120-124

23% (Diesel: 26%)

25% (Diesel: 29%)

28% (Diesel: 32%)

125-129

24% (Diesel: 27%)

26% (Diesel: 30%)

29% (Diesel: 33%)

130-134

25% (Diesel: 28%)

27% (Diesel: 31%)

30% (Diesel: 34%)

135-139

26% (Diesel: 29%)

28% (Diesel: 32%)

31% (Diesel: 35%)

140-144

27% (Diesel: 30%)

29% (Diesel: 33%)

32% (Diesel: 36%)

145-149

28% (Diesel: 31%)

30% (Diesel: 34%)

33% (Diesel: 37%)

150-154

29% (Diesel: 32%)

31% (Diesel: 35%)

34% (Diesel: 37%)

155-159

30% (Diesel: 33%)

32% (Diesel: 36%)

35% (Diesel: 37%)

160-164

31% (Diesel: 34%)

33% (Diesel: 37%)

36% (Diesel: 37%)

165-169

32% (Diesel: 35%)

34% (Diesel: 37%)

37% (Diesel: 37%)

170-174

33% (Diesel: 36%)

35% (Diesel: 37%)

37% (Diesel: 37%)

175-179

34% (Diesel: 37%)

36% (Diesel: 37%)

37% (Diesel: 37%)

180-184

35% (Diesel: 37%)

37% (Diesel: 37%)

37% (Diesel: 37%)

185-189

36% (Diesel: 37%)

37% (Diesel: 37%)

37% (Diesel: 37%)

190 or more

37% (Diesel: 37%)

37% (Diesel: 37%)

37% (Diesel: 37%)

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