A Benefit In Kind is a benefit received by employees or directors from their employer, in addition to the salary they receive. Company cars and car fuel allowances are two of the most common types of benefit in kind, and are subject to company car tax.
How does Company Car Tax work?
Company Car Tax (or Benefit in Kind tax, as it is also known) is payable by you on your company car if your employer allows you, or a member of your family, to use it for private use. This includes travelling to and from work. The rules are slightly different for vans. If you borrow the company van just to go between home and work and nothing more, you should not pay any tax.
What affects how much Company Car Tax you pay?
The amount of Benefit in Kind tax you pay on your company car is determined by the following factors:-
The list price of the car including any options or extras – known as the P11D value.
The CO2 emissions of the car (the lower the better), encouraging the use of ‘cleaner’ vehicles
The rate at which you pay tax, based on your income (your tax bracket)
Whether the car can run on alternative fuels
In addition, if fuel is paid for or provided by your employer for private use, this car fuel benefit is also taxable.
HM Revenue & Customs have provided this Company Car Tax Calculator to help you work out the amount of company car tax and car fuel tax you would have to pay.
Company Car Tax – Further Information
In addition, the Government’s Company Cars website provides information and guidance for employees and employers about Tax and NIC rules relating to company cars and company car fuel.
The rules relating to company car tax can change each year and are usually announced at Budget time. If you’re concerned about how future changes may affect you, check out the Government’s Forthcoming Changes to Car Benefit site.
Find out the CO2 emissions figure for your car.
And here is the Car Tax Calculator.
If you have the option of a company car or a cash allowance from your employer, reading our Company Car Allowance section may help you decide which to choose.