Company car tax guide

What the budget means for you and your business.

The new Wolkswagen R-line driving through the city.

The 2017 Autumn Budget

The government announced in its Autumn 2017 budget that they’ll provide £220 million for a new Clean Air Fund. This is good news for local authorities, who will benefit greatly from the National Air Quality Plan. They’ll be encouraged to help businesses create a more sustainable fleet. 

The Clean Air Fund will be paid for by an increase in taxes on diesel cars. A new Vehicle Excise Duty (VED) supplement will be applied to all new diesel cars, and there will be a rise in the existing Company Car Tax diesel supplement. Because of this, fleet managers and company car drivers around the country could be affected by the rise in taxes. 

Find out how your business can adapt to these changes using this helpful guide. 

Vehicle Excise Duty (VED)

Retail price index update: all vehicles registered in the UK and driven (or parked) on public roads must be taxed. The amount of car tax (Vehicle Excise Duty) you pay depends on how old your vehicle is, its engine size and CO₂ emissions.

In the Autumn 2017 budget, it was announced that the Retail Price Index (RPI) will also be taken into consideration when calculating a vehicle’s car tax. As of 1 April 2018, all vans, motorbikes and pre-2017 cars, as well as First Year Rates for cars under the post-April 2017 VED system will be affected by this. 

If your car was first registered after March 2001, but before 1 April 2017, you’ll pay no more than £5 extra VED. Owners of post-2011 vans and pre-2011 cars and vans will pay no more than £10 extra in VED. Over 90% of people buying a new car from 1 April 2018 will pay no more than £5 extra in VED. 

Tax year 2018 to 2019

C0₂ emissions Standard rate First year rate First year rate for
diesel vehicles
0 £0 £0 £0
1 - 50 £140 £10 £25
51 - 75 £140 £25 £105
76 - 90 £140 £105 £125
91 - 100 £140 £125 £145
101 - 110 £140 £145 £165
111 - 130 £140 £165 £205
131 - 150 £140 £205 £515
151 - 170 £140 £515 £830
171 - 190 £140 £830 £1240
191 - 225 £140 £1240 £1760
226 - 255 £140 £1760 £2070
Over 255 £140 £2070 £2070
*Autumn Budget 2017 announced that new diesel vehicles registered after 1 April 2018 that do not meet the RDE2 standard will be charged a supplement on their First Year Rate to the effect of moving up by one VED band.

Diesel supplement: another announcement in the Autumn 2017 Budget was that the diesel supplement will increase from 3% to 4% as of 6 April 2018. 

You’ll be affected by this if you supply your employee with a diesel car that they can drive for private use. The supplement is used to calculate your company car tax and car fuel benefit charge. This diesel supplement is still not applied to hybrid cars.

Diesel tax bands from April 2018

CO₂ emissions (g/km) Pre-April 2018
VED rates
First year VED rates for
diesels bought from
April 2018 not meeting
real world Euro 6
standards 
0 £0 N/A
1 - 50 £10 £25
51 - 75 £25 £100
76 - 90 £100 £120
91 - 100 £120 £140
101 - 110 £140 £160
111 - 130 £160 £200
131 - 150 £200 £500
151 - 170 £500 £800
171 - 190 £800 £1,200
191 - 225 £1,200 £1,700
226 - 255 £1,700 £2,000
Over 255 £2,000 TBA

Company car tax (CCT)

2018 to 2019 
CO₂ emissions,
g/km
2018 to 2019 
Appropriate
percentage of
car list price
taxed
2019 to 2020
CO₂ emissions,
g/km
2019 to 2020
Appropriate
percentage of
car list price
taxed
2020 to 2021
CO₂ emissions,
g/km
2020 to 2021 Appropriate percentage
of car list price taxed
0 - 50 13 0-50 16 0 2
51 - 75 16 51-75 19 1-50 (split by
zero emission
miles)
>130 2
70-129  5           
40-69 8
30-39 12
<30 14
76 - 94 19 76 - 94 22 51 - 54   15
95 - 99 20 95 - 99 23 55 - 59   16
100 - 104 21 100 - 104 24 60 - 64   17      
105 - 109 22 105 - 109 25 65 - 69   18
110 - 114 23 110 - 114 26 70 - 74   19
115 - 119 24 115 - 119 27 75 - 79   20
120 - 124 25 120 - 124 28 80 - 84   21
125 - 129 26 125 - 129 29 85 - 89   22
130 - 134 27 130 - 134 30 90 - 94   23
135 - 139 28 135 - 139 31 95 - 99   24
140 - 144 29 140 - 144 32 100 - 104   25
145 - 149 30 145 - 149 33 105 - 109   26
150 - 154 31 150 - 154 34 110 - 114   27
155 - 159 32 155 - 159 35 115 - 119   28
160 - 164 33 160 - 164 36 120 - 124   29
165 - 169 34 165+ 37 125 - 129   30
170 - 174 35     130 - 134   31
175 - 179 36     135 - 139   32
180+ 37     140 - 144   33
        145 - 149   34
        150 - 154   35
        155 - 159   36
        160+   37

 

Benefit in Kind: a company car is considered a benefit that isn’t included in your salary or wages. As it can’t be taxed under Income Tax, it is instead taxed as Benefit in Kind (BiK) and applies to all company cars that are also available for private use. 

The amount of BiK you’re likely to pay depends on the cost of the car and its CO2 emissions. The lower your emissions, the lower your BiK rate. Likewise, the cheaper your car, the lower your BiK rate. 

To calculate how much you’re likely to pay, the government works out the company car’s cash equivalent value. Employees then pay the relevant amount of tax on this cash value based on their tax bracket. 

Employers are liable to Class 1A national insurance contributions (NICs), but there is no liability to employee NICs.

Calculating the cash equivalent: how to calculate the cash equivalent value of a company car.

  • Step 1: Establish the price of the car for tax purposes (this is the P11D price, which you can find on this site and in our brochures). Any capital contributions made by the employee (up to a maximum of £5,000) are deducted from the list price.
  • Step 2: You then need to multiple the P11D price (as adjusted for capital contributions and accessories) by the percentage determined by the vehicle’s CO₂ emissions. This gives you the car’s cash equivalent.
  • Step 3: If the vehicle wasn’t available to the employee for part of the year, reduce the cash equivalent to account for those periods.
  • Step 4: If the employee makes any contributions for the private use of the vehicle, adjust accordingly.   

New emissions test: a new test was introduced in September 2017 to determine a car’s CO₂ emissions (Worldwide harmonized Light-vehicles Test Procedures (WLTP)). Under EU legislation all car manufacturers must report their results under this new method of testing as well as the existing method of testing (NEDC). 

The Golf SV will be the first Volkswagen to be WLTP tested and the result will affect VED rates and CCT rates (CO₂ emissions) for drivers of that vehicle. 

For VED or road tax, the findings of this test will affect all cars registered from 1 September 2017. For the CCT systems, the findings will take effect from the beginning of the tax year 2017 to 2018. 

As previously mentioned, if your vehicle has a diesel engine, you must add 4% (increased from 3%) to your appropriate percentage as of 6 April 2018. Cars that meet the Real Driving Emissions Step 2 (RDE2) standard are exempt from the diesel supplement.

Fuel duty

Fuel duty will be frozen for an eighth year in 2018-2019. Since 2011, these freezes have saved the average driver up to £850 by April 2019 compared to what they would have paid if the rates continued to increase as they were. 

The government will also review the existing fuel duty rates for alternative engines. In 2018-19, the government will end the fuel duty escalator for Liquefied Petroleum Gas (LPG), alongside the freeze for the main rate of fuel duty. 

Fuel duty rates

In some cases, the rates below include any rebates given if certain mandatory requirements are met, for example marking and restrictions of use.

Fuel type Rate
Unleaded petrol £0.5795 per litre
Heavy oil (diesel) £0.5795 per litre
Biodiesel £0.5795 per litre
Bioethanol £0.5795 per litre
Road fuel natural gas, 
including biogas
0.2470 per kg
Road fuel gas other than
natural gas – eg liquefied
petroleum gas
£0.3161 
*Source: Gov.UK

Electric charging point infrastructure

The government is keen to encourage uptake of plug-in hybrid and electric vehicles, with various grants available to businesses who adopt the scheme. Since the Autumn 2017 budget, they have established a new £400 million charging infrastructure fund, committed to investing an extra £100 million in Plug-in car grants, and £40 million in charging R&D. 

Charging your vehicle at work was previously a taxable benefit, however as of 2018 this will no longer be the case. This is another great incentive that will help to end the so-called “range anxiety” of plug-in hybrid and electric vehicles as charging infrastructure increases in popularity and accessibility.  

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