The short answer
If a company car is available for your private use, HMRC treats it as a benefit in kind. You pay income tax on its value, calculated from the car’s list price and a percentage linked to CO2 emissions, and the company usually pays Class 1A National Insurance on the same amount.
How the figure is worked out
The taxable value is the list price (including qualifying options and delivery, less certain capital contributions) multiplied by the appropriate percentage for its emissions and fuel type. That value is then taxed at your marginal income tax rate.
What affects it
Key variables:
- List price when new, not the price paid.
- CO2 emissions and, for hybrids, electric range.
- Diesel supplements where applicable.
- Periods when the car was unavailable.
- Private fuel provided by the company, which creates a separate charge.
Reporting
Company car benefits are reported to HMRC through payroll or P11D processes. Your accountant or payroll provider normally handles this.
Limitations and eligibility
- Rates and bands change between tax years.
- This page is general information, not tax advice.
- Pool cars and genuinely unavailable cars are treated differently.
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Frequently asked questions
What is benefit-in-kind tax on a company car?+
Income tax on the value of having a company car available for private use, based on list price and emissions.
Does the company pay anything?+
Usually Class 1A National Insurance on the benefit value.
Does commuting count as private use?+
Ordinary commuting is generally treated as private use for company car purposes.
Related reading
Sources
This guide is general information and not tax, legal or accounting advice. Sorbus Finance is a credit broker, not a lender. Finance is subject to status and lender criteria. Review your position with your accountant.