Prestige Car Leasing

Car Taxation

Morgan Highfield & Land Limited is not an IFA nor offers qualified tax advice & any general information is no substitute for your own qualified tax or legal advice.

Company Car Taxation

For those choosing their next company vehicle a critical factor when making a final decision might be the personal tax implications (benefit in kind, “BIK”) associated with each purchase.

Since April 2002 company car tax has been calculated on the basic elements of P11D (as a guide, retail list value) & CO2 emissions of the vehicle rather than the previous system of “business mileage”. On this page you will find examples of how much tax you might pay under the CO2-based method of calculation & a helpful guide to help you calculate the potential BIK implications for your next vehicle.

How is company car tax calculated?

In April 2002 a graduated system of tax was introduced basing company car tax rates on CO2 emissions. A vehicle's CO2 emission level directly determines the percentage of the on-the-road cost that will be taxed – simply, vehicles with lower CO2 emissions & combined with a lower list value (P11D) will incur a lower tax liability. Unlike previous years, the number of business miles for which a company car is used no longer has any bearing on the amount of tax an individual might pay, low business mileage users will pay the same taxable amount as high business mileage company car users.

How are CO2 levels measured?

CO2 emission levels are measured in terms of the weight of CO2 produced for every kilometer that the vehicle travels (g/km). All new vehicles registered after March 2001 will include their official CO2 rating on their registration document (V5) recognised by HMRC

What is the P11D value of my car?

The P11D value of a car will generally be the manufacturer's list price or value for the car (& any options fitted) including VAT, number plates and delivery charges, excluding any options which cost less than £100 & fitted after the car was first made available to you.

Is there an example of how to work out the taxation implications for my new car?

The CO2 tax rate is multiplied by the P11D value of the car to derive the annual taxable benefit value. The rate of income tax paid by the driver is applied to this amount to give the annual or monthly effective cost in taxation, take a look two typical examples below;

Example 1 – Petrol Vehicle

The MERCEDES-BENZ C CLASS COUPE C200 Sport 2dr Auto (Petrol engine) has CO2 emissions of 125g/km incurring a BIK (benefit in kind) rate of 20% 2015/6 (see CO2/BIK tax bandings). Note that if over following years if the CO2 emissions within each tax BIK band fall, annual taxation costs may increase.

The annual taxable benefit (without private usage contribution) of a MERCEDES-BENZ C CLASS COUPE C200 Sport 2dr Auto (@ 20% of its P11D value £32,400 in standard factory specification) might be £6480.00

Annually, a driver on the lower level of income tax might pay 20% of this cost: £6480.00 x 20% = £1296.00 (an equivalent of £108.00 per month)

Annually, a driver on the upper level of income tax might pay 40% of this cost: £6480.00 x 40% = £2592.00 (an equivalent of £216.00 per month)

Annually, a driver on the upper level of income tax might pay 45% of this cost: £6480.00 x 45% = £2916.00 (an equivalent of £243.00 per month)

Example 2 – Diesel Vehicle

The MERCEDES-BENZ GLE DIESEL ESTATE GLE 250 d 4Matic AMG Line 5dr 9G-Tronic (Diesel engine) has CO2 emissions of 156g/km incurring a BIK (benefit in kind) rate of 29% 2015/6 (see CO2/BIK tax bandings). Note that if over following years if the CO2 emissions within each tax BIK band fall, annual taxation costs may increase.

The annual taxable benefit (without private usage contribution) of a MERCEDES-BENZ GLE DIESEL ESTATE GLE 250 d 4Matic AMG Line 5dr 9G-Tronic (@ 29% of its P11D value £51,445 in standard factory specification) might be £14919.05

Annually, a driver on the lower level of income tax might pay 20% of this cost: £14919.05 x 20% = £2983.81 (an equivalent of £248.65 per month)

Annually, a driver on the upper level of income tax might pay 40% of this cost: £14919.05 x 40% = £5967.62 (an equivalent of £497.30 per month)

Annually, a driver on the upper level of income tax might pay 45% of this cost: £14919.05 x 45% = £6713.57 (an equivalent of £559.46 per month)

Is there a simple way to pay lower rates of Company Car Tax?

Because the level of tax you might pay is directly linked to both the CO2 emissions your car produces & vehicles list value (P11D) look for vehicles with a low CO2 rating & lower list value, however choose wisely - vehicles with a deemed “higher list value” can often offer reduced emissions & improved efficiency by comparison to their rivals.

In some circumstances diesel vehicles have a lower CO2 outputs than their petrol equivalents, driving a diesel might be beneficial but choosing a smaller petrol-engine vehicle may save you even more. Historically vehicles with an automatic gearbox often emitted higher CO2 emissions than those with manual transmissions, choosing to shift the gears could be a consideration but in some cases at the expensive of luxury & convenience.

What is a Diesel Euro 6 compliant engine & what can it do for me?

A Euro 6 compliant engine meets the latest stringent European emissions test regulations, offering better performance, greater running smoothness and greatly reduced exhaust gas pollutants. Unfortunately Diesel Euro 6 compliant vehicles will no longer have the diesel supplement of 3% waived by HMRC to a maximum of 37%.

Company Car Tax BIK Rates 2015-20: HMRC Fuel Type E (zero-emission cars)
Vehicle CO2 2015-16 2016-17 2017-18 2018-19 2019-20
g/km %BIK Rate %BIK Rate %BIK Rate %BIK Rate %BIK Rate
Electric Electric Electric Electric Electric
0 (EV) 5 7 9 13 16
Company Car Tax BIK Rates 2015-20: HMRC Diesel & Other Cars
Vehicle CO2   2015-16 2016-17 2017-18 2018-19 2019-20
g/km %BIK Rate %BIK Rate %BIK Rate %BIK Rate %BIK Rate
Petrol Diesel Petrol Diesel Petrol Diesel Petrol Diesel Petrol Diesel
50< 5 16 7 18 9 20 13 22 16 25
51-75 9 16 11 18 13 20 16 22 19 25
76-94 13 16 15 18 17 20 19 22 22 25
95-99 14 17 16 19 18 21 20 23 23 26
100-104 15 18 17 20 19 22 21 24 24 27
105-109 16 19 18 21 20 23 22 25 25 28
110-114 17 20 19 22 21 24 23 26 26 29
115-119 18 21 20 23 22 25 24 27 27 30
120-124 19 22 21 24 23 26 25 28 28 31
125-129 20 23 22 25 24 27 26 29 29 32
130-134 21 24 23 26 25 28 27 30 30 33
135-139 22 25 24 27 26 29 28 31 31 34
140-144 23 26 25 28 27 30 29 32 32 35
145-149 24 27 26 29 28 31 30 33 33 36
150-154 25 28 27 30 29 32 31 34 34 37
155-159 26 29 28 31 30 33 32 35 35 37
160-164 27 30 29 32 31 34 33 36 36 37
165-169 28 31 30 33 32 35 34 37 37 37
170-174 29 32 31 34 33 36 35 37 37 37
175-179 30 33 32 35 34 37 36 37 37 37
180-184 31 34 33 36 35 37 37 37 37 37
185-189 32 35 34 37 36 37 37 37 37 37
190-194 33 36 35 37 37 37 37 37 37 37
195-199 34 37 36 37 37 37 37 37 37 37
200-204 35 37 37 37 37 37 37 37 37 37
205-209 36 37 37 37 37 37 37 37 37 37
210-214 37 37 37 37 37 37 37 37 37 37
215-219 37 37 37 37 37 37 37 37 37 37
220-224 37 37 37 37 37 37 37 37 37 37
225-229 37 37 37 37 37 37 37 37 37 37
230 or above 37 37 37 37 37 37 37 37 37 37

Company car BIK rates in 2015 start at 13% for conventional petrol and 16% for conventional diesel vehicles, the rate increasing in 1% increments with increasing CO2 up to a maximum of 37%. For (non-conventional) diesel hybrid powered cars, the 3% diesel surcharge may not apply.

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Morgan Highfield & Land Limited is an independent credit brokerage with access to a representative range of financial products for the purposes of vehicle financing. Morgan Highfield & Land Limited is not a Lender. Lenders may pay us for introducing you to them.

Morgan Highfield & Land Limited is not an IFA nor offers qualified tax advice & any general information is no substitute for your own qualified tax or legal advice.
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