Company Cars

The main consideration when looking at company cars is Benefit in Kind (BIK). This is the tax that HMRC places on company cars, to ensure that tax is paid towards the perks of having a company car. The benefit in kind tax payable all depends on the “P11D Value”.

The P11D value is calculated by taking the cars list price plus VAT, delivery and all additional options over £100. This amount is then multiplied by a percentage linked to the cars CO2 emissions (this is listed at the end of this post). This P11D value is then multiplied by your income tax band, either 20% 40% or 50%, and this is the amount of additional tax you will pay.

Your employer will also have to pay Class 1 A National Insurance at 13.8% on this P11D value.

HMRC provide a P11D value calculator to help you work out what tax you will pay, as will most car sale websites. The link for the HMRC website is here -http://cccfcalculator.hmrc.gov.uk/CCF0.aspx

Fuel is also a consideration for the BIK calculation. If you don’t do that many private miles in the car then it is best to pay for this yourself, as if the company pays you will have to pay tax on this again. The fuel benefit rate is set each year by HMRC, for 2018/19 it is £23,400. The percentage used in the car BIK calculation is applied to this rate and then this amount is multiplied by your tax rate again.

The benefit of a company car is the company pays for all the servicing, insurance, and maintenance which can be a big perk to some people. You are also likely to get a new car every few years.

The alternative to company cars is to be paid a car allowance. This will be considered as additional salary and you will have to pay tax and NIC on this at the standard rates. This option is often preferable as you have more choice over your car choice, but you are in charge of all maintenance.

If you are considering buying a company car, let us know and we can calculate how this will affect you.

CO2 Percentage Bands

% Of P11D           2018/19**           2019/20**

Price                      CO2 (g/km)         CO2 (g/km)

9                              N/A                        N/A

13                           0-50                       N/A

16                           51-75                     0-50

19                           76-94                     51-75

20                           95-99                     N/A

21                           100-104                   N/A       

22                           105-109                  76-94

23                           110-114                   95-99

24                           115-119                   100-104

25                           120-124                  105-109

26                           125-129                  110-114

27                           130-134                  115-119

28                           135-139                  120-124

29                           140-144                  125-129

30                           145-149                  130-134

31                           150-154                  135-139

32                           155-159                  140-144

33                           160-164                  145-149

34                           165-169                  150-154

35                           170-174                  155-159

36                           175-179                  160-164

37                           180+                      165+

 

**Add 4% for diesels up to a maximum of 37%