Company Car drivers must pay tax on a Benefit In Kind
A Benefit In Kind is a benefit which employees or directors receive from their employer, over and above the salary they are paid. Two of the most common types of Benefit In Kind are Company Cars and Car Fuel Allowances, and these are subject to company car taxation.
How Company Car Tax works
If you drive a Company Car, you are liable to pay tax as it is classed as a Benefit In Kind.
Company Car Tax or Benefit In Kind Tax must be paid on your company car if you, or a member of your family, use it for private use. This would include travelling to and from your place of work. If you drive a company van, the rules are slightly different in that you should not be liable for tax if the only private use is to go between work and home.
What affects how much Company Car Tax you pay?
The Benefit In Kind tax you pay on your Company Car is based on:-
- The P11D value of the car – its list price including any extras or options
- The CO2 Emission level of the car – the lower the better
- Your Tax bracket – the rate you pay tax on your income
- Whether your car can run on an alternative fuel
Furthermore, if your employer provides you with fuel and you use some of it for private use, you would also be liable for Benefit In Kind tax on this Car Fuel Benefit.
Here is a very handy Company Car Tax Calculator provided by HM Revenue & Customs, which will help you work out how much Company Car Tax and Car Fuel Tax you will have to pay.
Further Information on Company Car Tax & Benefit In Kind
There is a Government website all about Company Cars which provides useful information and guidance for both employees and employers. It explains the rules about Tax and National Insurance relating to Company Cars and company car fuel. Changes in the rules relating to Company Car Tax are usually declared at Budget time. If you’re interested in finding out how future changes might affect you, take a look at the Government’s Forthcoming Changes To Car Benefit site.
Find out the CO2 Emissions for your car
Use the Car Tax Calculator to work out your tax
Check out our website at Car Leasing Guide for more information
Read all about Company Car Allowances if you have been given the option by your employer of a Company Car or a cash allowance.
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