HMRC Company Car Benefit Calculator

Find out why your company should use company cars and how to calculate the taxable benefits.
how to calculate benefits

Calculating company car tax is an important — but confusing — aspect of maintaining a fleet. In the UK, benefit in kind (BIK) taxes account for close to £1.8 billion of the total annual tax revenue. However, since no two company cars have the same taxable value, it’s necessary to use a car benefit calculator to determine what your company car tax will be. 

The goal of this article is to explain the benefits of company cars and how to calculate company car tax.

What Are the Benefits of Company Cars? 

By definition, a company car is “a vehicle used by a single employee that is leased or owned by their employer.” It can be used for business or personal reasons, but the mileage for each type of trip must be recorded separately for tax purposes. To make tracking the mileage of company cars easier, it’s recommended that you invest in fleet management software. 

how to calculate benefits of company cars

Just a few of the key benefits of a company car scheme include: 

  • Recruitment: Company cars may appeal to prospective employees. 
  • Convenience: They can make commuting between the office and out-of-office business appointments easier. 
  • Reputation: Company cars can help boost the image of your business. 
  • Taxes: If a company car is provided as part of a salary sacrifice scheme, it can reduce your business’s National Insurance Contributions (NIC) requirements.  

How to Calculate Company Car Tax 

Employers are legally required to report the taxable value of their company cars to HM Revenue and Customs (HMRC). Note that the taxable value of a car is not the same thing as its actual cost.

When calculating the taxable value of a company car, you also need to consider its fuel type and level of CO2 emissions as well as the amount of time it’s unavailable during the tax year. 

Get a Beginners Guide to Company Car Taxes:

Here’s an overview of the information you’ll need to calculate company car tax: 

  1. The tax year
  2. Dates of availability for the given tax year
  3. Number of days the car is unavailable during the dates given above 
  4. List price of the car (including VAT and accessories) 
  5. Employee capital contributions 
  6. Employee payments made toward private use
  7. Date the car was first registered 
  8. Fuel type
  9. Engine capacity
  10. Approved CO2 emissions figure (if applicable) 

You’ll also have to specify whether the company car has been provided via an Optional Remuneration Arrangement and whether the employer pays for private fuel. 

You can either work out the company car tax on your vehicle manually, or you can use an online car benefit calculator like the one provided by the UK government. UK car tax calculators like this make it much easier to determine the taxable value of your company cars and how much money you owe in taxes.  

Tips for Saving Money on Taxes

tips how to save money

The easiest way to save money on company car tax is to choose low emission vehicles. The higher the CO2 emissions of the company car, the higher the tax rate.

It makes sense financially for employees to drive eco-friendly company cars.

Cars producing no CO2 emissions have a 0% BIK tax rate as of April 2020. The tax rate will raise by just 1% each year until 2023. 

Another way to save money on company car tax is to provide pool cars to employees rather than company cars. A company car is given to individual employees for personal and business reasons and is a taxable benefit. Conversely, a pool car is shared by multiple employees and is considered an essential business tool. Therefore pool cars are subject to less taxation. 

Tracking Your Company Cars 

Calculating company car tax is a tedious but crucial part of maintaining a company car scheme. Drivers of company cars are legally required to track their personal and business mileage and to classify each separately. To make this process easier (and more accurate!), it’s recommended that you invest in a fleet tracking system like Fleet Geo. 

For more information on how Fleet Geo can improve your company car scheme, contact our customer service team today.

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