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Company car tax explained
Any employee, or director of a company, who is provided with a car, which can be used for private use, is liable to pay tax on the benefit of the car.
From April 2002, car tax is calculated using the vehicles list price or ‘P11D’ price and its approved carbon dioxide (CO2) emissions rating. This is calculated as grammes per kilometre or g/km, and vehicles that produce less CO2 will benefit from a low car tax banding.
CO2 emission table
The table below outlines the percentage of list price that equates to each CO2 emission banding.
| CO2 emissions |
Taxable %
of list price |
| Rated in g/km |
2006/07 & 2007/08 |
2008/09 |
| 135 |
15 |
15 |
| 140 |
15 |
16 |
| 145 |
16 |
17 |
| 150 |
17 |
18 |
| 155 |
18 |
19 |
| 160 |
19 |
20 |
| 165 |
20 |
21 |
| 170 |
21 |
22 |
| 175 |
22 |
23 |
| 180 |
23 |
24 |
| 185 |
24 |
25 |
| 190 |
25 |
26 |
| 195 |
26 |
27 |
| 200 |
27 |
28 |
| 205 |
28 |
29 |
| 210 |
29 |
30 |
| 215 |
30 |
31 |
| 220 |
31 |
32 |
| 225 |
32 |
33 |
| 230 |
33 |
34 |
| 235 |
34 |
35 |
| 240 |
35 |
35 |
Emission figures for vehicles are rounded down to the nearest 5g/km.
All vehicles fitted with a diesel engine will pay a 3% surcharge, up to a maximum of 35%.
From April 1st 2008, any vehicle with 120g/km or less will be taxed at a rate of 10% of the list price (13% for diesel vehicles.)
Cars without approved CO2 figures
For cars that do not have an approved CO2 figure, company car tax is calculated based on the vehicle engine size as follows.
| Engine size |
Pre 1/1/98
car |
1/1/98 or later car |
| 1,400cc or less |
15% |
15%* |
| 1,401cc to 2,000cc |
22% |
25%* |
| Over 2,001cc |
32% |
35% |
* 3% surcharge for diesel engine applies
Alternative Fuels
Vehicles that are powered by alternative fuel sources will benefit from a discount in company car tax, according to the scale charges above. The percentage discounts are as follows.
| Fuel type |
Discount applicable to scale charge |
| Electric only |
6% |
| Hybrid petrol / Electric (1/1/98 onwards) |
3% |
| LPG / CNG (Gas only, 1/1/98 onwards) |
2% |
| Bi-Fuel (type approved, 1/1/00 onwards) |
2% |
Bi-Fuel refers to vehicles that run on both petrol and gas and have fuel tanks for both. It is worth noting that while the costs of converting to bi-fuel lpg and petrol after type approval are excluded from the calculation of car benefit, there is no discount for such cars, after 5th April 2006.
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Click to go to the applicable table.
CO2 emission table
Cars without approved CO2 figures
Alternative Fuels
| Click here to use our interactive car tax calculator |
| Example |
An employee is provided with a new VW Golf 2.0 GT Tdi (diesel) 5dr Manual with Metallic Paint on 1st May 2006.
The Tax list price (P11D) when new is £18,262.00
The approved CO2 emission rating for this vehicle is 154 g/km, which equates to 17% of taxable list price.
To this you must add the 3% surcharge for diesel vehicles.
So, the taxable benefit to the employee is as follows.
£18,262.00 x (17% + 3%)
=
£3,652.40 per year.
To calculate how much tax the employee will pay per year, this figure is multiplied by the employees tax level:
For a 22% taxpayer:
£3,652.40 x 22% = £803.53 per year or £66.96 per month
For a 40% taxpayer:
£3,652.40 x 40% = £1,460.96 per year or £121.75 per month.
(The above example is based on the rates for the tax years 2006/07 and 2007/08.)
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