Company Car Tax Calculator

Calculate your company car tax liability based on your vehicle details and income

Car List Price (£)

CO₂ Emissions (g/km)

Fuel Type

Electric Range (miles)

Income Tax Band

Car Available For Private Use?

Yes

P11D Value: £0

Benefit-in-Kind (BIK) Rate: 0%

Annual BIK Value: £0

Monthly Tax Liability: £0

Annual Tax Liability: £0

Comprehensive Guide: How to Calculate Company Car Tax in 2024

Company car tax (officially known as Benefit-in-Kind or BIK tax) is a tax on employees who receive company cars for private use. The amount you pay depends on several factors including the car’s value, its CO₂ emissions, fuel type, and your personal income tax band.

Key Components of Company Car Tax Calculation

P11D Value: This is the list price of the car including VAT and delivery charges, but excluding the first year’s road tax and vehicle excise duty. It serves as the base value for calculations.
CO₂ Emissions: Measured in grams per kilometer (g/km), this is the most significant factor in determining your BIK rate. Lower emissions mean lower tax.
Fuel Type: Diesel cars typically have higher BIK rates than petrol, while electric vehicles enjoy the lowest rates.
Electric Range: For plug-in hybrids, the electric-only range affects the BIK rate. Longer ranges result in lower rates.
Income Tax Band: Your personal tax rate (20%, 40%, or 45%) determines what percentage of the BIK value you’ll pay as tax.
Availability for Private Use: If the car is available for private use (even if you don’t use it privately), you’ll be taxed on it.

Current BIK Rates for 2023/2024 Tax Year

CO₂ Emissions (g/km)	Petrol BIK Rate (%)	Diesel BIK Rate (%)	Electric Range (miles)	Plug-in Hybrid BIK Rate (%)
0	2%	2%	130+	2%
1-50	2%	5%	70-129	5%
51-75	15%	18%	40-69	8%
76-100	19%	22%	30-39	12%
101-150	25%	28%	<30	14%
151+	37%	37%	N/A	N/A

Step-by-Step Calculation Process

Determine the P11D Value
Find the manufacturer’s published UK list price including VAT and delivery charges. This is typically available from the dealer or manufacturer’s website. For example, if a car has a list price of £35,000, this is your P11D value.
Find the Appropriate BIK Rate
Use the car’s CO₂ emissions and fuel type to find the correct percentage from the BIK rate table. For a petrol car with 120g/km CO₂, the rate would be 25%. For an electric vehicle, it’s always 2% for 2023/2024.
Calculate the Annual BIK Value
Multiply the P11D value by the BIK rate. For a £35,000 car with a 25% BIK rate: £35,000 × 0.25 = £8,750 annual BIK value.
Apply Your Income Tax Rate
Multiply the annual BIK value by your income tax rate. For a higher rate (40%) taxpayer: £8,750 × 0.40 = £3,500 annual tax liability.
Divide by 12 for Monthly Payment
£3,500 ÷ 12 = £291.67 monthly tax deduction from your salary.

Special Cases and Exceptions

Electric Vehicles: Enjoy the lowest BIK rate of just 2% for 2023/2024, making them extremely tax-efficient. This rate will increase by 1% each year until 2028.
Plug-in Hybrids: The BIK rate depends on both CO₂ emissions and electric range. A plug-in hybrid with 30 miles electric range and 50g/km CO₂ would have an 8% BIK rate.
Pool Cars: Vehicles that are not allocated to specific employees and are used only for business journeys (with private use being merely incidental) are not subject to BIK tax.
Classic Cars: Vehicles over 15 years old with no list price are valued at £15,000 for BIK purposes, regardless of their actual market value.
Company Vans: Have a flat BIK rate of £3,600 for 2023/2024 (plus £688 if fuel is provided for private use), regardless of value or emissions.

How to Reduce Your Company Car Tax

Choose an Electric Vehicle
With BIK rates as low as 2%, electric cars offer significant tax savings. The government is actively promoting EV adoption through favorable tax treatment.
Opt for a Plug-in Hybrid with Long Electric Range
Hybrids with electric ranges over 130 miles qualify for the same 2% BIK rate as pure electric vehicles.
Select a Car with Lower CO₂ Emissions
Even small reductions in CO₂ can move you into a lower BIK band. A reduction from 101g/km to 100g/km could save you 6% in BIK rate.
Consider Salary Sacrifice Schemes
Some employers offer salary sacrifice arrangements where you give up part of your salary in exchange for a company car, potentially reducing your overall tax liability.
Check for Exemptions
Certain vehicles like mobility scooters, invalid carriages, and some emergency vehicles are exempt from BIK tax.

Comparison: Petrol vs Diesel vs Electric Company Cars

Factor	Petrol	Diesel	Electric
Typical BIK Rate (2023/24)	20-37%	25-37%	2%
Fuel Benefit Charge (if fuel provided)	£27,800	£27,800	£0 (no fuel provided)
Typical Annual Tax (40% taxpayer, £40k car)	£3,200-£5,920	£4,000-£5,920	£320
Typical Monthly Tax	£267-£493	£333-£493	£27
Congestion Charge Exemption	No	No (unless Euro 6)	Yes
ULEZ Compliance	Depends on age	Depends on age	Always compliant

Common Mistakes to Avoid

Ignoring Optional Extras: The P11D value includes all optional extras fitted to the car when new, which can significantly increase your tax liability.
Forgetting About Fuel Benefit: If your employer provides fuel for private use, you’ll face an additional fuel benefit charge (£27,800 for 2023/2024).
Not Reporting Changes: If your circumstances change (e.g., you stop having private use of the car), you must inform HMRC to avoid overpaying.
Assuming All Hybrids Are Equal: Only plug-in hybrids with sufficient electric range qualify for lower BIK rates. Mild hybrids are treated the same as petrol/diesel cars.
Not Considering Cash Alternatives: Sometimes taking a cash allowance instead of a company car can be more tax-efficient, especially for high-mileage drivers.

Future Changes to Company Car Tax

The government has announced the following changes to BIK rates:

Electric vehicle BIK rate will increase by 1% each year until 2028 (2% in 2023/24, 3% in 2024/25, etc.)
BIK rates for all vehicles will be frozen at 2024/25 levels until 2028
The 4% diesel supplement will be removed from April 2024
New bands will be introduced for vehicles with CO₂ emissions above 75g/km

These changes reflect the government’s continuing push toward lower-emission vehicles while providing long-term certainty for businesses and employees.

Authoritative Resources

For the most accurate and up-to-date information, consult these official sources:

GOV.UK: Calculate tax on company cars – Official government calculator and guidance
GOV.UK: Benefit-in-Kind rates for cars – Complete table of current BIK rates
HMRC Employment Income Manual – Detailed technical guidance on company car taxation

Frequently Asked Questions

Do I pay company car tax if I don’t use the car privately?
If the car is available for private use (even if you don’t actually use it privately), you’ll be liable for BIK tax. The only exception is if your employer has a strict policy preventing private use and can prove it.
How is the P11D value different from the price I paid for the car?
The P11D value is the manufacturer’s list price including VAT and delivery, while the price you pay might include discounts or exclude certain options. Always use the official list price for tax calculations.
Can I claim back the VAT on a company car?
Businesses can typically reclaim 50% of the VAT on a company car if it’s available for private use. If the car is used exclusively for business, 100% VAT can be reclaimed.
What happens if I change cars during the tax year?
HMRC will apportion the benefit based on how long you had each car. You’ll need to provide details of both vehicles on your P11D form.
Are there any exemptions for low-emission vehicles?
Electric vehicles have the lowest BIK rates (2% in 2023/24), but there are no complete exemptions for company cars. Even zero-emission vehicles are subject to BIK tax, albeit at a very low rate.

Case Study: Comparing Three Company Cars

Let’s compare the tax implications for three different company cars for a higher-rate (40%) taxpayer:

Petrol SUV (£45,000, 180g/km CO₂)
- BIK rate: 37%
- Annual BIK value: £16,650
- Annual tax: £6,660
- Monthly tax: £555
Diesel Saloon (£35,000, 120g/km CO₂)
- BIK rate: 28%
- Annual BIK value: £9,800
- Annual tax: £3,920
- Monthly tax: £327
Electric Hatchback (£40,000, 0g/km CO₂)
- BIK rate: 2%
- Annual BIK value: £800
- Annual tax: £320
- Monthly tax: £27

This comparison clearly shows the significant tax advantages of choosing an electric company car, with monthly tax savings of over £500 compared to a high-emission petrol SUV.

Alternative Options to Company Cars

If the company car tax seems too high, consider these alternatives:

Company Car Allowance: Receive a cash allowance instead of a company car. You’ll need to purchase or lease your own vehicle, but this can be more tax-efficient for high-mileage drivers.
Salary Sacrifice Scheme: Sacrifice part of your salary in exchange for a car. The sacrifice is made before tax, potentially reducing your overall tax liability.
Pool Cars: If your employer provides pool cars that are not allocated to specific employees and are used only for business, these are not subject to BIK tax.
Public Transport or Cycle Schemes: Some employers offer season ticket loans or cycle-to-work schemes as alternatives to company cars.
Company Van: If you don’t need a car, a company van might be more tax-efficient, with a flat BIK rate of £3,600 for 2023/2024.

How Employers Can Help Reduce Your Tax

Employers can take several steps to help reduce employees’ company car tax:

Offer a choice of lower-emission vehicles in the company car fleet
Provide charging points at work to encourage electric vehicle adoption
Implement salary sacrifice schemes for car provision
Offer cash alternatives to company cars where appropriate
Provide accurate P11D information to avoid errors in tax calculations
Consider leasing rather than purchasing vehicles to potentially access lower-emission models
Offer fuel cards only for business use to avoid the fuel benefit charge

Recent Legislative Changes

The company car tax system has undergone several recent changes:

April 2020: Introduction of new BIK bands based on the Worldwide Harmonised Light Vehicle Test Procedure (WLTP) for measuring CO₂ emissions, replacing the older NEDC test.
April 2021: Reduction in BIK rates for electric vehicles from 0% to 1%, with a planned gradual increase to 2% by 2022/23.
April 2022: Removal of the diesel supplement for cars that meet the Real Driving Emissions 2 (RDE2) standard.
April 2023: Freeze on BIK rates for most vehicles, with only electric vehicles seeing a 1% increase (from 1% to 2%).
April 2025: Planned introduction of new BIK bands for vehicles with CO₂ emissions above 75g/km, with rates increasing by 1% for each 5g/km above this threshold.

These changes reflect the government’s ongoing efforts to incentivize the adoption of lower-emission vehicles while maintaining revenue from company car taxation.

Calculating Tax for Multiple Company Cars

If you have access to more than one company car, the tax is calculated separately for each vehicle and then added together. For example:

Car 1: £30,000 P11D value, 25% BIK rate = £7,500 annual benefit
Car 2: £20,000 P11D value, 20% BIK rate = £4,000 annual benefit
Total annual benefit = £11,500
For a 40% taxpayer: £11,500 × 0.40 = £4,600 annual tax

Note that having multiple company cars is relatively rare and may attract additional scrutiny from HMRC.

Impact of Home Charging for Electric Company Cars

If your employer installs a charging point at your home for your electric company car:

The installation cost is not subject to BIK tax
The electricity used for charging is not subject to the fuel benefit charge
You may need to report the benefit if the charging point is also used for personal vehicles
Some employers offer home charging as part of their green initiatives

This makes electric company cars even more attractive from a tax perspective, as there are no additional charges for “fuel” (electricity) when charging at home.

Company Car Tax and Self-Assessment

If you’re required to complete a Self Assessment tax return, you’ll need to include your company car benefit:

The value will be shown on your P11D form from your employer
Enter this in the “Employment” section of your tax return
The tax will be calculated automatically based on your tax code
If you believe the calculation is incorrect, you can contact HMRC to dispute it

Remember that company car tax is collected through PAYE if you’re an employee, so you typically won’t need to pay anything additional through Self Assessment unless you have other untaxed income.

Company Car Tax for Directors

Company directors face the same BIK rules as employees, but there are some additional considerations:

The car must be recorded as a company asset
If the company is VAT-registered, it can typically reclaim 50% of the VAT on the purchase price
Corporation tax relief is available on the full cost of the car (for electric cars) or writing-down allowances for other vehicles
Directors may have more flexibility in choosing vehicles that optimize tax efficiency
Private use must be properly recorded to avoid disputes with HMRC

For director-owners of small companies, the tax implications can be complex, and professional advice is often recommended.

Company Car Tax in Scotland and Wales

The company car tax system is UK-wide, but there are some regional differences to be aware of:

Scotland: Uses the same BIK rates as the rest of the UK, but income tax bands are different (19%, 20%, 21%, 42%, 47%). This affects the actual amount of tax you pay.
Wales: Uses the same income tax rates as England and Northern Ireland, so BIK calculations are identical.
Northern Ireland: Follows the same system as England and Wales.

Scottish taxpayers should use the Scottish income tax rates when calculating their company car tax liability.

Company Car Tax for Classic Cars

Classic cars (typically defined as over 15 years old) have special rules:

The P11D value is capped at £15,000 regardless of actual value
BIK rates are based on engine size rather than CO₂ emissions:
- Engine size ≤ 1,500cc: 15% BIK rate
- Engine size > 1,500cc: 37% BIK rate
No diesel supplement applies to classic cars
Electric classic cars are treated the same as other classic cars

This can make classic cars an attractive option for enthusiasts, though maintenance costs and reliability should also be considered.

Company Car Tax and Business Mileage

While business mileage doesn’t directly affect your company car tax, there are related considerations:

If you receive mileage allowances for business travel, these are typically tax-free up to HMRC’s approved rates (45p per mile for first 10,000 miles)
High business mileage might make a company car more cost-effective than a cash alternative
Employers can reclaim VAT on fuel used for business travel
Detailed mileage records are essential to support any claims

Some employers offer enhanced mileage rates for electric company cars to encourage their use.

Company Car Tax and Car Allowances

Instead of providing a company car, some employers offer car allowances:

The allowance is added to your taxable income
You’re responsible for purchasing or leasing your own vehicle
You can claim tax relief on business mileage (45p per mile)
For high-mileage drivers, this can sometimes be more tax-efficient than a company car
You have complete freedom to choose your vehicle

A comparison between a company car and car allowance should consider both the tax implications and the total cost of vehicle ownership.

Company Car Tax and Fuel Benefit Charge

If your employer provides fuel for private use, you’ll face an additional fuel benefit charge:

The charge is based on a fixed amount (£27,800 for 2023/2024)
This amount is multiplied by your BIK rate and your income tax rate
For a 40% taxpayer with a 25% BIK rate: £27,800 × 0.25 × 0.40 = £2,780 annual tax
The charge applies even if you only use a small amount of fuel privately
Electric vehicles are exempt from this charge as they don’t use traditional fuel

Many employers now provide fuel cards only for business use to avoid this additional charge.

Company Car Tax and Vehicle Excise Duty (Road Tax)

While not directly part of company car tax, Vehicle Excise Duty (VED) is related:

VED is based on CO₂ emissions for the first year, then a standard rate applies
Electric vehicles are exempt from VED
For company cars, the employer is responsible for paying VED
VED costs are not included in the P11D value for BIK calculations
Some high-emission cars face an additional “luxury car” supplement for five years

The VED costs can add significantly to the total cost of providing a company car, particularly for high-emission vehicles.

Company Car Tax and Capital Allowances

While capital allowances affect the employer rather than the employee, they can influence company car policies:

Electric cars qualify for 100% first-year capital allowances
Low-emission cars (≤50g/km) qualify for 18% writing-down allowances
Other cars qualify for 6% writing-down allowances
These allowances reduce the company’s taxable profits
Employers may be more inclined to offer electric cars due to these tax benefits

These capital allowance rules make electric company cars particularly attractive for employers.

Company Car Tax and National Insurance

Company car benefits also affect National Insurance contributions:

The employer pays Class 1A NICs at 13.8% on the P11D value
For an electric car with £40,000 P11D value and 2% BIK rate: £800 × 13.8% = £110.40 annual employer NICs
For a petrol car with £40,000 P11D value and 25% BIK rate: £10,000 × 13.8% = £1,380 annual employer NICs
These costs are borne by the employer, not the employee
Lower BIK rates therefore reduce the employer’s NIC burden

This is another reason why employers may prefer to offer lower-emission company cars.

Company Car Tax and Termination

If you leave your job or return your company car during the tax year:

The benefit is apportioned based on the number of days you had the car
Your P11D will show the adjusted figure
If you receive a termination payment that includes compensation for losing the company car, this may be taxable
You should receive a P45 showing any adjustments to your tax code

Make sure your final payslip and P45 accurately reflect any changes to your company car benefit.

Company Car Tax and Part-Time Employees

Part-time employees are subject to the same company car tax rules, but with some considerations:

The benefit is calculated based on the full P11D value, not pro-rated for part-time hours
However, your actual tax liability will be lower if you earn less (as you might be in a lower tax band)
Some employers offer pro-rated car allowances for part-time staff
The availability of the car for private use is what triggers the benefit, regardless of how much you actually use it

Part-time employees should carefully consider whether a company car is the most cost-effective option.

Company Car Tax and Shared Cars

If a company car is shared between employees:

Each employee is taxed on their share of the benefit
The benefit is divided based on actual usage patterns
Detailed records must be kept to support the apportionment
HMRC may challenge arrangements that don’t reflect genuine shared use
Each employee’s share is calculated separately based on their tax band

Shared car arrangements can be complex to administer correctly and may not always result in tax savings.

Company Car Tax and Leased Vehicles

Leased company cars are treated the same as purchased cars for BIK purposes:

The P11D value is still based on the manufacturer’s list price, not the lease cost
Lease payments are not directly relevant to the BIK calculation
However, lower lease costs might make certain vehicles more attractive to employers
Some lease agreements include maintenance, which can be a taxable benefit if it covers private use
Employers can typically reclaim 50% of the VAT on lease payments for cars available for private use

Leasing can be a cost-effective way for employers to provide company cars, especially as it allows easy upgrading to newer, lower-emission models.

Company Car Tax and Company Car Schemes

Many employers operate company car schemes with specific rules:

Some schemes offer a choice of vehicles within certain BIK bands
Others provide a cash alternative to a company car
Some schemes include maintenance, insurance, and breakdown cover
Employers may set policies on private use and fuel provisions
Schemes often have specific rules about early termination or changes to vehicles

Always review your employer’s company car policy carefully to understand exactly what’s included and how it affects your tax position.

Company Car Tax and International Assignments

For employees on international assignments:

UK company car tax applies if you remain UK tax resident
Double taxation agreements may affect how the benefit is taxed
Some countries have reciprocal agreements with the UK on company car taxation
You may need to report the benefit in both the UK and your host country
Professional advice is essential for complex international assignments

International assignments can significantly complicate company car tax arrangements, and specialist advice is often required.

Company Car Tax and Disabled Employees

Special rules apply for disabled employees:

Cars adapted for disabled employees may qualify for reduced BIK rates
The disability must be certified by a medical professional
Adaptations must be necessary due to the disability
The reduced rate applies only to the adapted vehicle
Fuel benefit charges may also be reduced for disabled employees

Disabled employees should consult with HMRC or a tax advisor to ensure they’re receiving all applicable reliefs.

Company Car Tax and Environmental Considerations

The company car tax system is increasingly focused on environmental factors:

Lower BIK rates for electric and low-emission vehicles
Incentives for employers to provide charging infrastructure
Penalties for high-emission vehicles through higher BIK rates
Exemption from fuel benefit charges for electric vehicles
Future plans to tighten emissions standards for company cars

These environmental considerations are likely to become even more important in future years as the UK works toward its net-zero targets.

Company Car Tax and Brexit

Since Brexit, there have been some changes affecting company cars:

New CO₂ testing procedures (WLTP) have replaced the older NEDC system
Some European models may have different specifications for the UK market
Import duties may affect the list prices of some vehicles
Supply chain issues have impacted the availability of certain models
The UK is no longer bound by EU regulations on vehicle taxation

While the fundamental principles of company car tax remain the same, Brexit may lead to gradual divergence between UK and EU systems over time.

Company Car Tax and the Gig Economy

For gig economy workers who receive company cars:

The same BIK rules apply as for traditional employees
Some platforms offer vehicle rental as part of their service
Self-employed gig workers who provide their own vehicles can claim mileage allowances
The tax treatment depends on whether you’re classified as employed or self-employed
Some gig economy companies offer salary sacrifice schemes for vehicles

The gig economy presents some unique challenges for company car taxation, and the rules can be complex for workers who move between different platforms.

Company Car Tax and the Future

Looking ahead, we can expect several developments in company car taxation:

Gradual increases in BIK rates for electric vehicles
Potential introduction of road pricing systems that could affect company car choices
More sophisticated tracking of actual vehicle usage for tax purposes
Increased focus on whole-life carbon emissions, not just tailpipe CO₂
Possible reforms to align company car tax more closely with actual environmental impact
Development of new BIK bands for hydrogen and other alternative fuel vehicles

Staying informed about these potential changes will be important for both employers and employees in making cost-effective company car choices.