Explained: Company Car Tax
Is a company car worth it?
Company cars are seen by many as a great benefit to have, with numerous employers offering a company car as one of their benefits in order to entice new employees.
Typically, a company car will be inclusive of insurance, car tax (VED) and servicing/maintenance.
However, while those with company car experience will know, it is important to acknowledge that company cars come with a cost, and it comes in the form of tax.
Therefore, it is prudent to consider both the pros and cons when it comes to accepting and using a company car - so let’s get into the details…
How does company car tax work?
Whether you use your company car fully for business purposes or just for commuting and personal use, the HMRC will see this as a perk, and so tax will be applicable.
How much tax you pay on a company car will depend on a few things - namely the following:
- P11D value of the car
- BIK (Benefit in Kind) rate
- Personal income tax rate
In other words, the tax you pay on your company car depends on the net invoice cost of your car, its carbon dioxide emissions, and your annual salary.
But let’s break down those three key areas…