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Work Out Tax on Employee Company Cars

HMRC company car fuel benefit calculator is a handy way to calculate tax on employees' company cars in UK.

Note: The tool uses vehicle list price and carbon dioxide emissions to work out benefit in kind tax on company cars.

PRIVATE USE: The type of fuel used in a company car for private use also affects how you calculate tax on employee company cars.

All cars have a benefit in kind (BIK) percentage band. Even so, the rates may increase or decrease throughout different tax years.

HM Revenue and Customs (HMRC) use CO2 emissions and a P11D value to work out company car taxation.

P11D value refers to the list price of the vehicle (including accessories and VAT). But, it is not based on the first year registration fee or VED tax rates (bands).

It is not uncommon for employers to provide company cars or fuel for private use by their employees. If so, you would need to calculate the taxable value and report it to HM Revenue and Customs.

So, what is private use of a company car? Using it for private purposes would include the journeys between home and work. An exception applies if an employee uses it to travel to a ‘temporary’ place of work.

Note: The section explaining tax on company benefits clarifies the rules that relate to tax on company cars for employees.

Working Out Taxable Value

There are several ways to work out taxable value. You can use commercial payroll software or the HMRC company car and car fuel benefit calculator. Be aware that the online facility may not work in some browsers.

Note: Select fuel type ‘E’ for zero emission electric cars when calculating taxable value. Select fuel type ‘A’ for diesel cars that meet the Real Driving Emissions 2 standard (aka Euro 6d) for the current tax year.

Working Out the Value Manually

You can also use the P11D working sheet 2 to work out the value by manual calculations. Employers can use form P11D WS2 and P11D WS2b to calculate the cash equivalent of providing car and fuel benefit to an employee.

You would need to use the manual method of calculating taxable values if both of these apply during any tax year you report on:

  • The company car was not available for a period of at least thirty (30) consecutive days.
  • You stopped providing fuel for private use after you allowed it on previous occasions.

Taxable Value of Cars

You should not use ‘only’ the cost of the vehicle when you work out the taxable value of a car. Taxable values also depend on:

  • Car fuel and CO2 emissions data.
  • Periods where a car is unavailable during a tax year (e.g. due to a mechanical fault).

ALSO IN THIS SECTION

Employees Benefit Expenses | A simplified guide explaining how expenses and employee benefits work.

Expenses and Benefits for Employers | Duties for telling HMRC and paying tax and National Insurance.

How to Calculate Tax on Employees’ Company Cars in United Kingdom