When you have a company car, this is subject to Benefit In Kind (BiK), which means that you pay income tax based on the vehicle you are operating.
The amount of tax you will pay is based on:
· The P11d value of the vehicle; and
· The CO2 which is set out as grams per kilometre (g/km)
When you’re running a company car as an employee you need to accurate determine the level of tax you will have to pay on the vehicle, taking into account your current tax band (are you a 20, 40 or 45% tax payer).
The P11d is the form which is completed by the employer and sent to HMRC in relation to the Pay As You Earn Scheme.
For a vehicle, the P11D value of your car comprises of the list price, including VAT, plus any delivery charges, but does not include the car’s first registration fee or its annual road tax.
Before moving forwards with a vehicle, do ask your vehicle supplier to provide this information along with the car’s CO2 to calculate the tax payable.
If you are using private fuel for company cars, a taxable benefit of £22,200 is payable for tax year 2016-17. This increases to £22,600 for 2017-18.
For vehicles with higher P11d/CO2, it is often more cost-effective to utilise a personal contract hire vehicle and pay for the vehicle personally. The employer contribution to your car is still subject to income tax but the P11d and CO2 is an irrelevant consideration. However, when you are looking at vehicles, you need to ensure you are building in an accurate cost for the vehicle plus the maintenance/servicing and the insurance too.
Do consider that when you take a car via your employer, they will arrange your insurance, so you need to organise this separately if you are going down the personal route.
Read more about this case and car in our recent post regarding the customers new Vauxhall Astra…
