As a business that provides its employees with at least one company car, company car tax is, of course, never far away. There are many factors to consider before sitting down and entering them into your company car tax calculator for 2020 21.
Read More: What Is Defined As A Company Car?
Calculating the amount of company car tax your business pays sounds daunting on the surface – but it doesn’t have to be. Luckily today, business owners can acquire services and specialised solutions. As a result, this makes calculating company car tax less of a headache. This post puts together the most important company car tax-related topics for businesses to help keep HMRC happy.
What Happens If You Don’t Pay The Right Amount Of Tax?
When it comes to calculating your company car tax, it pays to be careful and to choose the right fleet for your needs.
Fundamentally, HMRC will look to reclaim any underpayments in company car tax. Underpayments of tax for each company car will certainly amount to an overall large bill. Therefore, you will want to calculate the right amount of tax to avoid future financial headaches. When it comes to calculating company tax, the saying, “get it right the first time” really comes into effect.
Company Car Tax Calculator UK: What Do You Need To Keep Track Of?
Importantly, the amount of company car tax paid by businesses depends on the following:
- Each vehicle’s P11D value
- Each vehicle’s CO2 emissions
What Is A Company Car’s P11D Value?
The P11D value is not an official term – it is rather a colloquial term for the value of a vehicle in the eyes of HMRC. Moreover, the P11D is a form that employers must provide to HMRC if the employer provides their employees with Benefits-In-Kind, which includes company cars. Your company car’s P11D value is the list price of the vehicle (vehicle price + any modifications), minus VAT and the company car’s first registration fees.
(Vehicle value – (VAT – registration fees))
Read More: What Is A Benefit-In-Kind?
How Do I Keep Track Of A Company Car’s CO2 Emissions?
In order to reduce the national carbon footprint, the UK government encourages businesses to use greener fleets. One way of incentivising this is by reducing company car tax for vehicles with lower CO2 emissions. This also encourages more businesses to swap their petrol and diesel-based company car fleet for electric ones.
However, businesses can precisely keep track of their company cars’ CO2 emissions with vehicle tracking software. This solution allows businesses to track all types of vehicle information. This includes real-time vehicle location, driver identification, vehicle speed history as well as vehicle CO2 emissions.
Read More: What Is Tracking Software?
What Are The Benefits Of Tracking Company Cars For Your Company Car Tax Calculator 2020 21?
As mentioned above, tracking your company cars especially comes in handy when it comes to measuring your company cars’ emissions. This is the most obvious direct benefit, but there are additional benefits that you should be aware of.
Did you know that employers are exempt from paying company car tax in certain instances?
These include the following contexts if the vehicle is:
- Only used for business journeys
- Aadapted for employees with disabilities
- Classified as an emergency vehicle
- Privately owned
- Classified as a “pool vehicle”
Read More: What Is A Pool Vehicle?
For example, you can track your vehicles to ensure that your vehicles are used for business journeys only. Good tracking software comes equipped with driver identification features, as you can also track your vehicles in real-time on a user interface via an application. This increases transparency within your business. Your employees will know that you will know who is driving each vehicle.
Good vehicle tracking software also makes use of “Geofencing” software.
In short, this means that you can determine the areas in which you want your company vehicles to operate. This avoids the temptation of your employees to use your vehicles to run personal errands, as you will receive a notification if any of your vehicles venture outside of your designated geofence.
Read More: What Is Geofencing And How Does It Benefit Your Business?
Company Car Tax Calculator UK: How Do You Calculate Company Car Tax?
There are two parts to calculating company car tax in the UK. They are:
- What the employer pays
- What the employee pays
For employers, the process is relatively easy. As discussed above, employers should be aware of each company car’s P11D value (Value of the vehicle in the eyes of HMRC) as well as the vehicle’s CO2 emissions.
The amount of company car tax paid by the employee depends on a number of factors: They are:
- The employee’s income tax bracket, depending on their salary
- The vehicle’s CO2 emissions
- The list price of the vehicle plus VAT
- The fuel type the vehicle takes
- How often the vehicle uses the vehicle.
So, here’s how you calculate your company car UK tax:
- Calculate the P11D value (The vehicle’s list price and extra costs)
- Multiply this value by the BiK band (The bracket your vehicle’s CO2 emissions fall into)
- Multiply this value again by the employee’s income tax rate
For a more extensive guide to company car tax, check out our Vimcar Company Car Tax Hub.
Company Car Tax Calculator UK: Stay Smart With Vimcar
Company car tax can seem like a bureaucratic minefield. Luckily, Vimcar simplifies your vehicle tracking needs with our Fleet Geo tracking solution. Stay on top of your business’ company car data with vehicle tracking software and bring your business into the 21st century.
