Taxation of Company Cars: Key Aspects for UK Businesses - More Than Accountants

Taxation of Company Cars: Key Aspects for UK Businesses

Taxation of Company Cars: Key Aspects for UK Businesses

Taxation of company cars is a critical consideration for employees or employers using a company vehicle for personal use, including commuting. In the UK, company cars are seen as a benefit-in-kind (BIK), which means tax is based on the car’s value to you. The tax amount depends on the car’s P11D value, CO2 emissions, and your income tax bracket. It’s crucial to understand these tax implications for effective budgeting and decision-making about company car usage.

In the United Kingdom, the tax rates for company cars evolve over time, necessitating staying informed on the latest rules and regulations. For example, all fully electric cars currently benefit from a 2% BIK rate, set to increase in April 2025. Your income tax bracket also influences the tax amount, with percentages ranging from 20% to 45%.

It’s essential to understand how the taxation of company cars works to ensure you’re meeting your tax obligations and using your company car in the most cost-effective manner. By being knowledgeable about the tax implications and staying informed of any changes, you can make the best decisions for yourself and your business.

Want to switch to More Than Accountants? You can get an instant quote online by using the form below. In a like for like comparison for services we are up to 70% cheaper than a high street accountant.

Furthermore, for UK businesses, understanding the taxation of company cars is vital, especially when using them for personal needs like commuting. These vehicles are considered a benefit-in-kind (BIK), with tax implications based on value, emissions, and tax brackets. For businesses looking to manage their company accounts effectively, including handling aspects related to company cars, Company Accounts Services can offer invaluable assistance and guidance.

Understanding Company Car Taxation

Company car taxation is vital for those using a company car for private purposes, including commuting. It’s crucial to comprehend how this tax is calculated and the responsibilities for both employees and employers. You will need to pay tax if you or your family use the vehicle for private purposes. The tax amount is based on the car’s value, its CO2 emission level, and your income tax rate. HM Revenue and Customs (HMRC) oversees company car tax collection and reporting. Learn more about HMRC and P11D forms.

The first step in calculating company car tax involves determining the car’s P11D value, which includes the car’s list price, delivery charges, VAT, and optional accessories. The next step is to find the Benefit-in-Kind (BIK) rate for your car based on its CO2 emissions. The BIK rate can be found on the Government’s BIK tax bands table and is expressed as a percentage.

To calculate the taxable value, you need to multiply the car’s P11D value by its BIK rate. Lastly, to determine the actual tax payable, multiply the taxable value by your income tax bracket (20%, 40%, or 45%). This amount will be deducted from your salary or wages accordingly.

For employers, it is crucial to understand that company car tax also carries National Insurance Contributions (NICs) implications. Employers are required to pay NICs on the BIK value of the company car for each employee using a company car for private purposes.

Remember to stay up-to-date with the latest changes in company car tax legislation, as rates and regulations can change annually. By keeping yourself informed, you can ensure that you remain compliant with the law and make well-informed decisions regarding company car usage.

Facts about Company Cars

When receiving a company car, understanding its tax implications is vital. In the UK, tax rates depend on factors like the car’s value, CO2 emissions, and fuel type. Electric vehicles, which are increasingly popular, enjoy tax benefits due to their zero emissions. Explore more on taxation of electric company cars.

As you drive your company car, be aware that cars emitting CO2 at a specified level are taxed from 5% to 35% of the list price. For petrol cars, those emitting 1-75g/km CO2 are taxed at 5%, while those emitting 76-99g/km are taxed at 10%. Diesel cars, on the other hand, are subject to a 3% supplement, making them slightly more expensive in terms of taxation compared to petrol cars. However, it’s essential to keep in mind that diesel cars are often more fuel-efficient, potentially offsetting the tax difference.

For those driving electric cars, there is good news: these vehicles are subject to a five-year relief, meaning you won’t have to pay tax on the benefit during this period. This relief incentivises the adoption of electric vehicles in the UK, helping to reduce overall CO2 emissions.

When it comes to hybrid-powered cars, they generally have lower CO2 emissions compared to their petrol or diesel counterparts. This often translates into a lower tax rate, making them an attractive choice for a company car.

Remember that the value of the company car also plays a significant role in determining the tax you’ll pay. In England and Wales, the amount of company car tax depends on whether you’re a 20%, 40%, or 45% taxpayer, with the tax calculated based on the car’s value and its corresponding benefit-in-kind (BIK) rate.

In summary, understanding the tax implications of your company car is essential to making informed decisions about the vehicles you choose and how they affect your overall financial situation. By considering the car’s value, power source and CO2 emissions, you can determine the best option tailored to your needs while benefiting from a reliable mode of transport for both personal and professional use.

Assessing Car Value for Taxation

For tax purposes, it’s crucial to understand how your company car’s value is assessed. This involves determining the car’s P11D value and BIK rate, influenced by CO2 emissions and fuel type. For a deeper dive into the P11D form and its importance in this process, visit What is a P11D form?.

To begin with, it is important to know the cost of the car, which includes the list price – the manufacturer’s recommended retail price – plus any optional extras, delivery charges, and VAT. The list price forms the basis for calculating the ‘P11D value’. Keep in mind that discounts or incentives you have received on a car will not affect its list price.

Next, you need to determine the car’s BIK rate. The BIK rate is influenced by factors such as its CO2 emissions and the type of fuel it uses. Moreover, the car’s BIK rate also depends on the fuel type, whether petrol, diesel or electric, and the relevant emission category according to the UK’s tax bands.

Once you have determined the P11D value and the BIK rate, you can calculate the taxable value of the car, which is the value subject to tax based on your company car tax rate. To do this, simply multiply the P11D value by the BIK rate.

For instance, if a car has a P11D value of £20,000 and a BIK rate of 20%, the taxable value would be £4,000. Now, to find out how much you owe in company car tax, multiply the taxable value by your personal tax rate. If your personal tax rate is 20%, your company car tax would be £800 per year.

In summary, to assess a car’s value for taxation, you must consider its cost, list price, VAT, and BIK rate. Remember to use accurate figures and ensure that all required information is available to make an informed calculation. This way, you can confidently manage your company car tax obligations.

When it comes to keeping track of these values and ensuring accurate tax calculations, businesses can greatly benefit from professional Bookkeeping Services. These services provide the expertise needed to manage these aspects efficiently and accurately.

Considerations for Employers

When providing company cars to your employees as a benefit, it’s crucial to understand the tax implications associated with them. The tax on company cars is based on a percentage of the vehicle’s list price, which varies depending on its CO2 emissions level. As an employer, you have certain National Insurance and reporting obligations related to company cars used for private purposes.

One of the key considerations when offering this employee benefit is selecting vehicles with lower CO2 emission levels. Cars with lower emissions will attract a lower percentage of tax, resulting in savings for both you and your employees. It’s also essential to be aware of any recent changes or updates to company car taxation rules, such as the effect of the Worldwide Harmonised Light Vehicle Test Procedure (WLTP) on cars registered from 6th April 2020.

As an employer, you should also consider the management aspects of providing company cars. This includes maintaining control over employee safety and your business’s image. Both company cars and those funded via a car allowance fall under the jurisdiction of the Health and Safety at Work Act 1974.

In addition, it’s important to communicate the tax implications of company cars to your employees clearly. For example, help them understand how their personal tax liability is calculated based on factors like list price, CO2 emissions, and the number of days they have access to the car for personal use.

Lastly, consider implementing strategies to reduce the overall tax burden of providing company cars. Some of these strategies may include offering employee car allowances, encouraging carpooling, or incorporating electric or hybrid vehicles into your fleet. By staying informed and evaluating your options, you can provide valuable employee benefits within a tax-efficient framework.

Employers must understand that company cars incur National Insurance Contributions (NICs) on their BIK value. Selecting lower-emission vehicles can lead to tax savings. For a more comprehensive explanation of NICs and their implications, see Self-Employed National Insurance Explained.

Fuel Taxation and Company Cars

When choosing a company car, it’s essential to consider the fuel taxation implications. The amount of tax you’ll pay depends on various factors such as the type of fuel your company car uses, its CO2 emissions, and your income tax bracket.

The fuel benefit charge is calculated based on a “multiplier” set by the government, increasing as CO2 emissions rise. For petrol vehicles, this multiplier is lower than diesel vehicles due to their lower carbon dioxide emissions. Diesel vehicles which meet RDE2 emissions standards, however, have a lower multiplier, making them more tax-efficient.

Fuel types you might consider for your company car include:

  • Petrol: While petrol vehicles typically produce fewer CO2 emissions than diesel, they often have higher fuel consumption rates. Costs can be managed by choosing a fuel-efficient petrol model.

  • Diesel: Diesel cars have lower CO2 emissions but typically generate higher levels of other air pollutants. Diesel models with RDE2 certification are not subject to the 4% diesel surcharge for company car tax.

  • Electric: Electric vehicles produce zero CO2 emissions and are exempt from the Benefit-in-Kind (BIK) rates for company cars. This makes them an attractive option in terms of taxation.

Your company car tax is calculated based on the car’s P11D value, its CO2 emissions bracket, and your income tax bracket. The higher your emission rate and income tax bracket, the higher your company car tax will be.

HMRC sets advisory fuel rates (AFRs) for fuel reimbursement. These are guidelines for employers to use when reimbursing employees who use their company cars for business travel. The AFRs vary depending on the fuel type and engine size, so it’s important to keep up to date with the current rates. Your employer can use these guidelines to reimburse you tax-free, provided the fuel is solely used for business purposes.

The fuel type and CO2 emissions of your company car impact the tax amount. HMRC’s advisory fuel rates (AFRs) are critical for fuel reimbursement calculations. Discover more about business mileage and HMRC’s AFRs at Business Mileage – Who Can Claim?.

In summary, consider the fuel type, CO2 emissions, and your income tax bracket when choosing a company car. Taking these factors into account will ensure you make an informed decision that best suits your needs while remaining tax-efficient.

Taxation based on Car Emissions

Taxation is primarily based on the car’s CO2 emissions. The recent shift from NEDC to WLTP for emission measurement has significant implications for tax calculations. For more details on tax rates and allowances, check out Tax Rates and Allowances 2023-24.

Since 2020, the Worldwide Harmonised Light Vehicle Test Procedure (WLTP) has replaced the outdated New European Driving Cycle (NEDC) as the standard for measuring CO2 emissions. The WLTP provides a more accurate reflection of real-world driving conditions and emissions.

For zero-emission vehicles, like electric cars or those producing no CO2 emissions, you may qualify for the 100% first year allowance, which provides significant tax savings. Similarly, ultra-low emission vehicles (those with CO2 emissions of 1 to 50g/km) have their taxable value based on the electric range of the car, encouraging a shift towards cleaner mobility.

Additionally, the Real Driving Emissions (RDE2) standard has been introduced to regulate the emissions of nitrogen oxides (NOx). Cars compliant with RDE2 may receive further reductions in tax liability.

To understand your taxation based on car emissions, follow the steps below:

  1. Determine your car’s CO2 emission level, measured in grams per kilometre (g/km).
  2. Identify the corresponding appropriate percentage by consulting the CO2 emissions ready reckoners.
  3. Multiply the car’s P11D value (its list price, plus accessories, less capital contribution) by the appropriate percentage.
  4. Multiply the result by your income tax bracket (20%, 40% or 45%) to calculate your annual tax liability for the company car.

Using this approach, you can easily assess the impact of CO2 emissions on your tax liability. By opting for a low or zero-emission vehicle, you can save on taxes and contribute to a greener future.

Online Taxation and Filing

Managing company car taxes is streamlined using HMRC’s online tools. The online company car and car fuel benefit calculator is particularly useful for determining your tax liability based on factors like the car’s list price, fuel type, carbon dioxide emissions, and your income tax bracket. Learn more about how to calculate company car tax at Taxation of Company Cars.

When it comes to reporting, staying organized and accurate is essential. You can conveniently submit P11D forms for employees with company cars electronically using HMRC’s PAYE online service. This service simplifies managing all aspects of company car taxation, including benefits in kind and any associated fuel expenses.

It’s important to keep your records up to date and report any changes to your company car or fuel expenses correctly. HMRC’s online services also allow you to inform them about changes in your company car details, employer payments for private fuel use, or changes in the status of a company car.

In summary, leveraging HMRC’s online tools and services is crucial for staying on top of your company car taxation responsibilities. Being organized, accurate, and compliant allows you to enjoy the benefits of having a company car without the stress of manually managing complex tax calculations and submissions.

For businesses seeking comprehensive assistance beyond the use of online tools, especially in managing broader tax obligations, exploring Tax Returns Services can provide valuable support and expertise.

Private Use versus Company Cars

Choosing between private use and company cars can be a complicated decision for both drivers and employers. In this section, we’ll explore the key factors to consider when deciding between these options and how they can affect you in terms of taxation.

When you use a company car for private purposes, including commuting, you will be liable to pay tax. The amount you pay depends on the value of the company car and various factors such as its CO2 emissions and the fuel type. Keep in mind that the choice of cars may be more restricted under a company car scheme due to the impact of car tax rates.

If your company car package includes fuel, you will also need to pay Car Fuel Benefit each month. This can result in additional costs, as your employer will pay a National Insurance Contribution (NIC) at 13.8% on the fuel benefit too. Make sure to weigh the pros and cons of having fuel included in your package.

On the other hand, if you opt for private use and receive a car allowance, you will have more freedom in choosing your vehicle and will have full control over its maintenance. The car allowance is treated as taxable income, and you may need to pay additional tax depending on your income tax bracket. Also, consider that when using a private car, you are responsible for costs such as insurance, maintenance, and fuel.

One option gaining popularity is the use of electric cars, which have lower emissions and therefore, reduced tax rates. For example, a £59,000 Tesla electric car owner would pay a 2% tax in the 2022-23 tax year, resulting in £1,180. This could be a more cost-effective and environmentally friendly choice for company and private users alike.

In conclusion, assess your personal needs, the type of vehicle you prefer, and the potential tax implications when deciding between private use and a company car. Consider the benefits and drawbacks of each option, keeping in mind factors such as fuel provisions, maintenance costs, and car tax rates before making a decision that suits your individual circumstances.

Deciding between private use and company cars involves understanding the different tax implications. For sole traders navigating these decisions, Sole Trader Accounting Services can provide valuable insights.


Potential Benefits to Employees

Having a company car can be advantageous, offering the convenience and potential savings. However, it’s important to understand the tax implications, especially the Benefit in Kind (BiK) charges. For an in-depth understanding of BiK and its impact on your taxation, read What is a Benefit in Kind?.

Depending on the specific arrangement with your employer, you may also enjoy fuel reimbursement or allowance for using the company car for private purposes. However, it’s important to note that the private use of a company car is considered a benefit-in-kind by HMRC, which could result in additional tax liability. Furthermore, some employees might find lower tax implications if they opt for electric company cars, which can have lower Benefit in Kind (BiK) charges due to environmental considerations.

Another potential advantage of having a company car is the opportunity to drive a newer, more prestigious vehicle than you might otherwise be able to afford privately. Employers often provide access to high-quality cars with up-to-date safety features or cutting-edge technology, making your driving experience more enjoyable and secure.

However, it’s crucial to remember that a company car may come with tax implications both for you as an employee and your employer. The tax liability depends on the car’s CO2 emission levels and the BiK cash value of the car, which in turn determines the amount of income tax you pay and the National Insurance contributions your employer makes. So, it’s essential to consider all aspects before opting for a company car as an employee benefit.

Understanding Tax Years

Understanding tax years and their implications in relation to company car taxation is essential. For the most current information on tax years, including rates, thresholds, and allowances that may impact your company car tax calculations, visit UK Tax Rates Thresholds and Allowances.

For example, consider the tax years 2025 to 2026, 2026 to 2027, and 2027 to 2028. Being aware of which tax year you are currently in is vital for preparing for any changes in taxation policy or the applicable percentages for company cars. Staying updated on these adjustments is important to ensure you are paying the correct amount of tax on your company car benefits.

Take, for instance, the tax year starting on 6 April 2017. In this year, the government may have introduced changes to the regulations surrounding company car taxation. Being aware of such changes is crucial for adjusting your tax calculations accordingly and avoiding any surprises.

When calculating your company car tax liability, it’s necessary to factor in your income tax bracket. This is determined by your total annual income, including any benefits you receive from your company car. With this information, you can calculate the Benefit-in-Kind (BIK) rate applicable to your specific tax year.

In conclusion, a thorough understanding of tax years and their impact on your company car tax obligations is crucial. Staying informed about changes in taxation policy and understanding your income tax bracket are key to confidently, accurately, and efficiently managing your company car tax payments. Always consult the latest government guidelines and seek professional advice when necessary.

National Insurance Contributions

Both employers and employees have tax obligations regarding NICs when providing or receiving a company car. For a detailed explanation of NICs and how they apply in different employment scenarios, check out Self-Employed National Insurance Explained.

As an employer, you must be aware that when you provide your employees with a company car, you are required to pay Class 1A National Insurance Contributions (NICs) on the value of the benefit provided. The value of the company car benefit is determined by the list price of the car, its CO2 emissions, and the employee’s personal tax rate.

To calculate the NICs due, you’ll need to obtain the benefit in kind (BIK) value of the company car, which is arrived at by multiplying the list price of the car by the appropriate percentage based on its emissions. Once you have the BIK value, you can then multiply it by the current Class 1A NIC rate (13.8% for the tax year 2023/24). This will give you the total amount of NICs that you, as an employer, must pay on the company car benefit provided to your employee.

For employees, the taxation of company cars is related to the income tax charge on the BIK value. Depending on your income, you will be taxed at either the basic (20%), higher (40%), or additional (45%) rate. The tax that you will pay on the BIK value is added to your overall taxable income for the year. Therefore, it’s essential to consider the potential tax implications when accepting a company car as part of your remuneration package.

In summary, both employers and employees have tax obligations related to National Insurance Contributions when providing or receiving a company car. A clear understanding of these obligations and accurate calculations are essential to ensure compliance and make informed decisions as part of your company car strategy.

Financial Decisions: Buying versus Leasing

When considering company cars, you need to weigh the financial implications of both buying and leasing. Deciding between buying and leasing company cars depends on various factors, including tax implications. For insights into reducing corporation tax, which can be a significant factor in this decision, visit How to Reduce Your Company’s Corporation Tax.

Leasing a company car provides you with the convenience of making smaller, regular payments as opposed to a large initial outlay when purchasing. You can benefit from tax relief as you pay the lease rentals, a factor that could lower your overall costs. Leasing also allows you to change cars more frequently, ensuring your fleet remains updated with the latest technologies and features. With leasing, you can recover 100% of VAT if the vehicle is solely for business use or 50% if the car has private usage. Furthermore, leasing costs can be written off as a business expense.

However, leasing a company car means you never actually own the vehicle, and you may be subject to excess mileage charges or penalties for wear and tear.

On the other hand, buying a company car allows you to own the vehicle, giving you more control over its usage. When purchasing, there is potential for tax advantages based on the vehicle’s carbon emissions. For instance, if your car emits more than 75g/km but less than 130g/km, you’re rewarded with an 18% rate of Capital Allowances on a reducing balance. For cars emitting above 130g/km, the annual rate is 8%.

Nonetheless, purchasing a company car often requires a larger upfront cost and can result in slower tax relief during the early years of ownership. Additionally, car maintenance costs need to be factored in as the responsibility lies with you if you own the vehicle.

In summary, you should evaluate what is best for your business in terms of cash flow, taxation, and overall fleet management. Keep in mind that leasing provides more flexibility with tax relief on rental payments while buying offers ownership and tax advantages based on the vehicle’s emissions.

Carbon Emissions Testing

In recent years, there has been a shift in focus towards reducing vehicle carbon emissions and improving air quality. This has led to changes in the testing and taxation of company cars, with a direct impact on the way CO2 emissions are measured and factored into tax calculations.

Previously, the New European Driving Cycle (NEDC) was used as the standard testing procedure for determining CO2 emissions. However, it was criticised for not accurately reflecting real-world driving conditions, which led to the introduction of the Worldwide Harmonised Light Vehicle Test Procedure (WLTP).

The WLTP is a more advanced and comprehensive method for determining a vehicle’s CO2 emissions. It provides a closer representation of real driving conditions, ensuring that the emissions data is more reliable. As a result, company cars registered from 6 April 2020 will be taxed based on their CO2 emissions figure obtained under the WLTP testing regime.

Understanding how your company car is tested for carbon emissions is crucial, as it affects the amount of tax you need to pay. The WLTP measurements include a wider range of driving situations, such as urban and suburban driving, motorways, and high-speed roadways. This makes it a more accurate assessment of your vehicle’s environmental impact.

It’s essential to consider the CO2 emissions of a prospective company car, as the tax rate will be directly influenced by the emissions levels. Lower-emitting vehicles will attract lower tax rates, which provide a financial incentive for individuals and businesses to choose more environmentally friendly options. To get an idea of how much company car tax you are likely to pay, you can refer to this helpful company car tax guide.

Remember, being aware of the CO2 emissions and the respective testing procedure for your company car will not only help you make informed decisions, but it will also contribute to environmental sustainability and reduce your tax liability.

Specifics for Electric and Diesel Cars

When considering company car taxes for electric and diesel vehicles, it’s important to understand how the system works. Factors such as the car’s CO2 emissions, electric mileage range, and overall cost can significantly impact the amount of tax you’ll pay.

For electric cars, their zero on-road emissions make them subject to much lower taxes compared to petrol and diesel cars. The tax rate is determined by the car’s electric mileage range, meaning the distance it can travel without producing CO2 emissions. As a result, electric cars with higher mileage ranges will generally have lower tax rates. For example, in the tax year 2027 to 2028, the maximum appropriate percentage for cars with zero emissions is 5%.

On the other hand, diesel company cars have higher tax rates due to their CO2 emissions. A diesel car that emits around 100g/km of CO2 is likely to have a Benefit in Kind (BIK) rate of 25% – significantly more than the 5% maximum for fully electric cars in 2027/28. Keep in mind that the tax rate for diesel cars will also depend on their CO2 emissions, with higher-emitting vehicles facing higher rates.

When comparing electric and diesel company cars, consider the overall costs included in the tax calculation. This will generally involve the car’s P11D value – the taxable value of the vehicle, which includes factors such as its list price, delivery charges, and optional extras. For example, a £40,000 electric car producing zero emissions would have a calculation like this: £40,000 x an appropriate tax percentage, leading to a cost lower than a diesel vehicle with the same P11D value but higher CO2 emissions.

Ultimately, the taxation of company cars for both electric and diesel vehicles will depend on several factors, including emissions, electric mileage range, and the P11D value. By understanding these variables, you can make an informed decision when choosing a company car and better manage your taxes.

Additional Perks and Benefits

When you have access to a company car, there are various additional perks and benefits you might be entitled to. Some of the common benefits include reduction in your personal travel expenses and potentially lower insurance costs. There may also be instances where certain perks, such as accommodation and other employee benefits, are provided alongside your company car.

As an employee, having a company car could alleviate the burden of paying for fuel, maintenance, and depreciation costs associated with using your personal vehicle. By using the company car for both work and personal use, you can save a significant amount on your overall expenses. In some cases, your employer may even provide you with a fuel card, allowing you to fill up the car at the company’s expense.

Regarding insurance, employers often have fleet insurance policies to cover all their company cars. As a result, you might not need to take out a separate policy for your company car. This can save you money, especially if the fleet policy provides comprehensive coverage.

However, it is important to note that the valuable perks associated with a company car may come with some taxation implications. In the UK, company car users are required to pay a Benefit-in-Kind (BiK) tax, which is calculated based on the vehicle’s value and its CO2 emissions. The tax amount varies depending on your personal income tax bracket and the specific details of the company car you have access to. The BiK tax ensures that you are taxed fairly for the benefits you receive outside of your regular earnings.

In some cases, your employer may also provide accommodation or other employee benefits alongside your company car. This could mean access to housing near your workplace or an allowance to cover the cost of renting accommodation. Just like with the company car, any additional employee benefits you receive will be subject to UK taxation laws and may be treated as taxable income.

Remember that having a company car can bring about various benefits and perks, but it is essential to be aware of your taxation obligations. Ensure you understand the impact of the Benefit-in-Kind tax and other taxes on your earnings, and factor these costs into your decision-making when assessing the overall value of your company car and any associated employee benefits.

Servicing and Maintenance Costs

Understanding servicing and maintenance costs is crucial for company car users. For an overview of claimable expenses, refer to Expenses Guide for Limited Companies and Directors.

Firstly, it’s essential to note that maintenance and servicing costs are generally not subject to additional tax. This means that you won’t be paying extra tax on these expenses, making company cars an attractive option for employees and directors. You can enjoy benefits like maintenance, repairs, insurance, and road tax without incurring additional taxes source.

To ensure your company car remains in good working condition, regular servicing is crucial. This typically includes routine inspections, oil changes, tyre rotations, and fluid top-ups. By staying on top of your car’s maintenance requirements, you can prevent unnecessary wear and tear, avoid costly repairs and even increase its resale value.

As a company car user, you should also be mindful of managing repair costs. Unexpected breakdowns or damage may occur, requiring you to fix the car in a timely manner. It’s essential to budget for potential repair costs and have a contingency plan in place if the need arises. This could include setting aside funds specifically for repairs or opting for a comprehensive insurance policy that covers both routine and unexpected expenses.

In conclusion, by staying informed about servicing and maintenance costs associated with company cars, you can make well-informed decisions that benefit both you and your business. Remember to factor in these expenses when selecting a company car and ensure that regular maintenance takes place to maximise the value of your vehicle in the long term.

Understanding Tax Information Notices

As a company car user, it’s essential for you to grasp the concept of Tax Information Notices. These are statements that provide insight into how taxation works for company cars, the rates applied, and the possible impact on your finances.

Tax Information Notices help you understand the specific taxes associated with using a company car for both business and personal use. These notices are issued by the UK government and are regularly updated to reflect any changes in taxation policies or rates. You can find valuable information on the GOV.UK website regarding the current state of company car taxation.

When reviewing a Tax Information Notice, you should pay close attention to the factors that determine company car tax. These may include the car’s value, its CO₂ emissions, and the fuel type. Understanding these factors will enable you to estimate the tax you might have to pay and make informed decisions about your company car usage.

It’s also crucial for you to be aware of the impact note related to company car taxation. An impact note is a document that outlines the projected financial and administrative consequences of any changes in taxation policies. These notes can help you plan for upcoming tax years and predict potential alterations to your tax liability. You can find relevant impact notes for future tax years on the GOV.UK website.

In summary, staying up to date with Tax Information Notices and impact notes allows you to be well-prepared for company car tax implications. By understanding these notices, you can make informed decisions about your car usage and take necessary steps to minimise your tax liability. Don’t hesitate to consult with a professional advisor if you need further guidance or clarification regarding your specific situation.

Future of Company Car Tax

As you may be aware, the landscape of company car taxation is constantly evolving. Over the next few years, changes will be implemented to the appropriate percentage rates used to calculate your tax liabilities. So it’s essential for you to stay informed about these updates, ensuring that you and your employees make the best choices when selecting company vehicles.

From the tax year 2025 to 2026, the appropriate percentage rates will increase by 1 percentage point (ppt) for all vehicles to a maximum of 4% for zero-emission cars and 20% for higher-emitting vehicles. This change means that low-emission vehicles will become even more tax-efficient for you and your business.

The tax year 2027 to 2028 will see a further increase of 1ppt to a maximum of 5% for zero-emission vehicles and 21% for those with higher emissions. As the government aims to reduce greenhouse gas emissions, these changes are designed to encourage businesses to opt for greener cars and help meet climate change goals.

During the period between 2025 and 2028, Benefit-in-Kind (BIK) rates will also be adjusted, influencing the company car tax bands. This adjustment impacts how much tax you’re required to pay on the value of the car and its CO2 emissions. So, the selection of greener vehicles will not only reduce your environmental footprint but also your tax liabilities.

In summary, staying updated on company car tax regulations is crucial for your business decisions. The focus on promoting greener vehicles will have a significant impact on the appropriate percentage rates and Benefit-in-Kind calculations in the coming years. By selecting low-emission cars, you can contribute to a more environmentally friendly future while benefiting from reduced taxes.


Previous Tax Rates and Allowances 2023/24: Essential Updates for UK Taxpayers
Next UK Tax Rates, Thresholds, and Allowances 2023/24: Insights for the Latest Tax Years
Table of Contents