Company Car Tax Calculator
Calculate your company car tax liability based on vehicle details and personal circumstances
Your Company Car Tax Results
Complete Guide to Calculating Company Car Tax Rates (2024)
Company car tax (also known as Benefit-in-Kind or BIK tax) is a tax on the personal use of a company vehicle. This comprehensive guide explains how company car tax is calculated, the factors that affect your tax liability, and how to minimise your tax burden legally.
How Company Car Tax Works
When you receive a company car that’s available for private use, HMRC considers this a taxable benefit. The tax you pay depends on:
- The car’s P11D value (list price including VAT and delivery but excluding first registration fee and road tax)
- The car’s CO₂ emissions (or electric range for plug-in vehicles)
- Your income tax band (20%, 40% or 45%)
- Whether the car is available for private use
- The fuel type and whether it’s a hybrid or electric vehicle
Company Car Tax Rates for 2024-2025
The BIK rates are based on CO₂ emissions and fuel type. Here are the current rates:
| CO₂ Emissions (g/km) | Petrol Cars | Diesel Cars | Hybrid (Plug-in) | Electric Cars |
|---|---|---|---|---|
| 0 | – | – | 2% | 2% |
| 1-50 | 14% | 18% | 2-14% | 2% |
| 51-75 | 18% | 22% | 5-18% | – |
| 76-100 | 22% | 26% | 8-22% | – |
| 101+ | 25-37% | 29-37% | 12-37% | – |
For plug-in hybrids, the exact rate depends on the electric range. Cars with higher electric ranges benefit from lower BIK rates.
How to Calculate Your Company Car Tax
The calculation follows these steps:
- Determine the P11D value – This is the list price including VAT and delivery charges
- Find the appropriate BIK rate – Based on CO₂ emissions and fuel type
- Calculate the annual BIK value – P11D value × BIK rate
- Apply your income tax rate – 20%, 40% or 45% of the annual BIK value
- Divide by 12 – For your monthly tax liability
For example, a petrol car with P11D value of £30,000 and CO₂ emissions of 120g/km would have:
- BIK rate: 28%
- Annual BIK value: £30,000 × 0.28 = £8,400
- Annual tax for 40% taxpayer: £8,400 × 0.40 = £3,360
- Monthly tax: £3,360 ÷ 12 = £280
Electric and Hybrid Company Car Tax Benefits
Electric vehicles (EVs) and plug-in hybrids (PHEVs) benefit from significantly lower BIK rates to encourage adoption of cleaner vehicles:
| Electric Range (miles) | 2024-2025 BIK Rate | 2025-2026 BIK Rate |
|---|---|---|
| 130+ | 2% | 2% |
| 70-129 | 5% | 5% |
| 40-69 | 8% | 8% |
| 30-39 | 12% | 12% |
| Less than 30 | 14% | 14% |
Pure electric vehicles with zero emissions qualify for the lowest 2% BIK rate until at least 2025, making them extremely tax-efficient company cars.
How to Reduce Your Company Car Tax
There are several legitimate ways to reduce your company car tax liability:
- Choose a lower-emission vehicle – Cars with lower CO₂ emissions have lower BIK rates
- Opt for electric or hybrid – EVs and PHEVs with good electric range benefit from the lowest rates
- Consider a cheaper car – Lower P11D value means lower taxable benefit
- Pay for private fuel – If you pay for all private fuel, you won’t pay the fuel benefit charge
- Use salary sacrifice – Some schemes allow you to sacrifice salary for a company car, reducing your taxable income
- Check for exemptions – Pool cars and vans may have different tax treatment
Company Car Tax vs Car Allowance
Many employees have the choice between a company car or a car allowance. Which is better depends on your circumstances:
| Factor | Company Car | Car Allowance |
|---|---|---|
| Upfront cost | None (employer provides) | Need to purchase/lease |
| Running costs | Usually covered by employer | Your responsibility |
| Tax implications | BIK tax based on car value | Allowance is taxable income |
| Flexibility | Limited to company policy | Choose any car |
| Best for | High-mileage drivers, those who want new cars regularly | Low-mileage drivers, those who want specific cars |
For most employees, a company car is more tax-efficient if you drive more than 10,000 business miles per year. For lower mileage drivers, a car allowance might work out better.
Future Changes to Company Car Tax
The government has announced that BIK rates will remain frozen until 2025 for most vehicles, with gradual increases planned until 2028. Electric vehicles will maintain their 2% rate until 2025, then increase by 1% each year to 5% by 2028.
From 2025, the BIK rates for plug-in hybrids will be adjusted based on more stringent electric range requirements, with only vehicles capable of 80+ miles electric range qualifying for the lowest rates.
Common Company Car Tax Mistakes to Avoid
- Not reporting private use – Even occasional private use must be reported
- Ignoring fuel benefits – Free private fuel is an additional taxable benefit
- Not keeping records – You need to track business vs private mileage
- Choosing based on list price alone – A more expensive car might have lower emissions and better tax rates
- Forgetting about employer NICs – Employers pay 13.8% Class 1A NICs on the BIK value
Frequently Asked Questions
Do I pay company car tax if I only use the car for business?
No, if the car is genuinely only used for business and you have no private use (including commuting), there’s no BIK tax. However, HMRC has strict rules about what constitutes private use.
How is the P11D value calculated?
The P11D value is the list price of the car including VAT and delivery charges, but excluding the first registration fee and road tax. It includes any optional extras fitted to the car.
What counts as private use?
Private use includes commuting to and from work, personal errands, and any non-business journeys. Even occasional private use makes the car taxable.
Can I avoid company car tax by paying for private use?
No, paying for private use doesn’t eliminate the BIK tax, though it might reduce the fuel benefit charge if you pay for all private fuel.
How does company car tax work for electric vehicles?
Electric vehicles currently benefit from a 2% BIK rate (2024-2025), making them extremely tax-efficient. This rate will increase to 3% in 2025-2026 and 4% in 2026-2027.
Important Disclaimer: This calculator provides estimates based on current HMRC rates and should not be considered financial advice. Actual tax liabilities may vary based on individual circumstances. For precise calculations, consult a qualified tax advisor or refer to the official HMRC guidance.
Authoritative Resources
For official information about company car tax rates and calculations: