As an employer, if you provide a company car to your employees, they must pay tax on the cash equivalent of the car provided. That’s because HMRC view an employee’s ability to use a company car as a benefit in kind which has a cash value, on top of your employee’s regular salary. The cash equivalent of using a company car is calculated by taking the list price of the car, multiplied by a certain tax percentage. This percentage depends on the amount of carbon dioxide emitted by the car, and the type of fuel it uses. This article will outline the formula for you to follow to work out the list price of the car and find the relevant tax percentage that applies. Should you want more help with company car tax then please get in touch.
List price formula
The list price of the car is calculated using the following formula:
| £ |
|
| List price when new | A |
| Add Accessories (over £100) |
B |
| Less: Employee contribution (max £5,000) |
(C) |
| Revised List Price | D |
Tax percentage by emission level and fuel type
This revised list price is then multiplied by the appropriate tax percentage, as per the table below:
| 2017/18 | 2018/19 | 2019/20 | ||||
| g/km CO2 |
Petrol % |
Diesel % (+3%) |
Petrol % |
Diesel % (+4%) |
Petrol % |
Diesel % (+4%) |
| 0-50 | 9 | 12 | 13 | 17 | 16 | 20 |
| 51-75 | 13 | 16 | 16 | 20 | 19 | 23 |
| 76-94 | 17 | 20 | 19 | 23 | 22 | 26 |
| 95-99 | 18 | 21 | 20 | 24 | 23 | 27 |
| 100-104 | 19 | 22 | 21 | 25 | 24 | 28 |
| 105-109 | 20 | 23 | 22 | 26 | 25 | 29 |
| 110-114 | 21 | 24 | 23 | 27 | 26 | 30 |
| 115-119 | 22 | 25 | 24 | 28 | 27 | 31 |
| 120-124 | 23 | 26 | 25 | 29 | 28 | 32 |
| 125-129 | 24 | 27 | 26 | 30 | 29 | 33 |
| 130-134 | 25 | 28 | 27 | 31 | 30 | 34 |
| 135-139 | 26 | 29 | 28 | 32 | 31 | 35 |
| 140-144 | 27 | 30 | 29 | 33 | 32 | 36 |
| 145-149 | 28 | 31 | 30 | 34 | 33 | 37 |
| 150-154 | 29 | 32 | 31 | 35 | 34 | 37 |
| 155-159 | 30 | 33 | 32 | 36 | 35 | 37 |
| 160-164 | 31 | 34 | 33 | 37 | 36 | 37 |
| 165-169 | 32 | 35 | 34 | 37 | 37 | 37 |
| 170-174 | 33 | 36 | 35 | 37 | 37 | 37 |
| 175-179 | 34 | 37 | 36 | 37 | 37 | 37 |
| 180-184 | 35 | 37 | 37 | 37 | 37 | 37 |
| 185-189 | 36 | 37 | 37 | 37 | 37 | 37 |
| 190+ | 37 | 37 | 37 | 37 | 37 | 37 |
The maximum percentage that can be applied to the list price of the company car to calculate the cash equivalent of the benefit is currently 37%.
From 2018/19, if diesel cars are Real Driving Emissions 2 (RDE2) standard, meaning they satisfy permitted emission levels, then no additional percentage will be added to percentage figure.
As you can see from the table above, HMRC is increasing the relevant percentages up to 2019/20.
What about low-emission cars?
From 2020/21 the rules will be reformed, and percentages will be reduced for ultra-low emission cars. HB Accountants will provide an update regarding these rules closer to the time of their introduction.
Examples of tax by car type
We have identified the tax an employee provided with a company car throughout a full tax year could expect to pay on four different models of vehicles in the 2017/18, 2018/19 and 2019/20 tax years:
BMW i3:
- Fuel Type: Zero Emission
- Approximate market value: £34,075
- CO2 Emission Figure: Zero
| 2017/18 | 2018/19 | 2019/20 | |
| ‘Cash Value’ of company car as calculated using rules noted above |
£3,066.00 | £4,429.00 | £5,452.00 |
| Taxed @ 20% | £613.00 | £886.00 | £1,090.00 |
| Taxed @ 40% | £1,266.00 | £1,772.00 | £2,181.00 |
| Taxed @ 45% | £1,380.00 | £1,993.00 | £2,453.00 |
Audi A4 Saloon (1.4 TFSI)
- Fuel Type: Petrol
- Approximate market value: £29,180
- CO2 Emission Figure: 122g/km
| 2017/18 | 2018/19 | 2019/20 | |
| ‘Cash Value’ of company car as calculated using rules noted above |
£6,711.00 | £7,295.00 | £8,170.00 |
| Tax per year if pay at @ 20% |
£1,342.00 | £1,459.00 | £1,634.00 |
| Tax per year if pay at @ 40% |
£2,684.00 | £2,918.00 | £3,268.00 |
| Tax per year if pay at @ 45% |
£3,019.00 | £3,282.00 | £3,676.00 |
Land Rover Discovery Sport (Pure 2.0 eD4 150hp (5 seat) 5d)
- Fuel Type: Diesel
- Approximate market value: £28,195
- CO2 Emission Figure: 123 g/km
| 2017/18 | 2018/19 | 2019/20 | |
| ‘Cash Value’ of company car as calculated using rules noted above |
£7,331.00 | £8,176.00 | £9,022.00 |
| Taxed @ 20% | £1,466.00 | £1,635.00 | £1,804.00 |
| Taxed @ 40% | £2,932.00 | £3,270.00 | £3,609.00 |
| Taxed @ 45% | £3,299.00 | £3,679.00 | £4,060.00 |
Volkswagen Passat (S TSI 1.4 125 PS 6 speed man)
- Fuel Type: Petrol
- Approximate market value: £22,025
- CO2 Emission Figure: 123 g/km
| 2017/18 | 2018/19 | 2019/20 | |
| ‘Cash Value’ of company car as calculated using rules noted above |
£5,065.00 | £5,506.00 | £6,167.00 |
| Taxed @ 20% | £1,013.00 | £1,101.00 | £1,233.00 |
| Taxed @ 40% | £2,026.00 | £2,202.00 | £2,467.00 |
| Taxed @ 45% | £2,279.00 | £2,478.00 | £2,775.00 |
We can handle these tax matters for you
This information will help you to identify the tax your employees should pay for the use of their company cars. There are also specific rules for fuel provided for private use and for company vans available for private use. If you would like any assistance or have any questions regarding these tax matters please do not hesitate to contact Amy Armitage by email at amy@hbaccountants.co.uk or any other member of the HB Accountants team by calling 01992 444466.
Please note that all the figures in this article have been rounded to the nearest pound.
