Company car tax guide

What the budget means for you and your business.

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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 were affected by this.

Tax year 2019 to 2020

C0₂ emissions Standard rate First year rate for Petrol/ Diesel*

First year rates for Diesels not meeting real world Euro 6 standards

0 £0 £0 £0
1 - 50 £140 £10 £25
51 - 75 £140 £25 £110
76 - 90 £140 £110 £130
91 - 100 £140 £130 £150
101 - 110 £140 £150 £170
111 - 130 £140 £170 £210
131 - 150 £140 £210 £530
151 - 170 £140 £530 £855
171 - 190 £140 £855 £1280
191 - 225 £140 £1280 £1815
226 - 255 £140 £1815 £2135
Over 255 £140 £2135 £2135

*Diesel cars that are tested to RDE2 standards.

 

Company car tax (CCT)

Emissions
CO2 (g/km)
2019/20 Benefit in Kind (BIK) 2020/21 Benefit in Kind (BIK) 2021/22 Benefit in Kind (BIK)^
 

Petrol/
Electric

Diesel Electric range miles

Petrol/
Electric

Diesel Electric range miles

Petrol/
Electric

Diesel
0 (EV) 16%     2%     TBA  
1-50 16%   130 or above 2%   TBA TBA  

1-50

16%   70-129 5%   TBA TBA  

1-50

16%   40-69 8%   TBA TBA  

1-50

16%   30-39 12%   TBA TBA  
1-50 16%   1-29 14%   TBA TBA  
51-54 19%     15%     TBA  
55-59 19%     16%     TBA  
60-64 19%     17%     TBA  
65-69 19%     18%     TBA  
70-74 19%     19%     TBA  
75 19%     20%     TBA  
76-79 22% 26%   20% 24%   TBA TBA
80-84 22% 26%   21% 25%   TBA TBA
85-89 22% 26%   22% 26%   TBA TBA
90-94 22% 26%   23% 27%   TBA TBA
95-99 23% 27%   24% 28%   TBA TBA
100-104 24% 28%   25% 29%   TBA TBA
105-109 25% 29%   26% 30%   TBA TBA
110-114 26% 30%   27% 31%   TBA TBA
115-119 27% 31%   28% 32%   TBA TBA
120-124 28% 32%   29% 33%   TBA TBA
125-129 29% 33%   30% 34%   TBA TBA
130-134 30% 34%   31% 35%   TBA TBA
135-139 31% 35%   32% 36%   TBA TBA
140-144 32% 36%   33% 37%   TBA TBA
145-149 33% 37%   34% 37%   TBA TBA
150-154 34% 37%   35% 37%   TBA TBA
155-159 35% 37%   36% 37%   TBA TBA
160-164 36% 37%   37% 37%   TBA TBA
165-169 37% 37%   37% 37%   TBA TBA
170-174 37% 37%   37% 37%   TBA TBA
175-179 37% 37%   37% 37%   TBA TBA
180+ 37% 37%   37% 37%   TBA TBA

^Subject to UK Government announcements.

 

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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