Company Car Tax
It’s important to weigh up whether your company car (that you also use for private use) is valuable to you, it really depends on the amount of tax that you pay, and if fuel is paid -also the mileage that you do. There are lots of websites that offer valuable advice and it really is worth talking to your employer and weighing up the pros and cons.
So how does the company car tax thing work?
Basically, you take the price of the car and multiply it by a certain percentage. However, the way the percentage rate is worked out is based on emissions, measured in CO2 mg/kg (how many milligrams of carbon dioxide there are in a kilogram of gas emitted from the engine.)
The percentage chargeable is calculated as follows;
- Take 15%
- Add on 1% for every 5mg/kg CO2 emissions over 155mg/kg. So, for instance, 172 mg/kg would give you an extra 3%, totalling 18%.
- If the car has a diesel engine, add on 3%
- If the result is more than 35%, reduce it to 35%.
- This gives you the percentage chargeable.
This percentage is simply applied to the list price.
The result of this exercise is the car benefit. It is not necessarily the amount on which you will be taxed. The actual cost to you is the benefit multiplied by your highest rate of tax.
For instance if the car benefit is £4000, and your highest rate of tax is 22%, it would cost you £880. If you paid tax at the highest rate of 40%, this cost would go up to £1600.
You will need to consider the benefit you receive from having worry free motoring as opposed to the extra tax you will pay.
Remember the lower the CO2 emissions the less you have to pay!