Company Car Tax

In the past, the company car tax system was based on the amount of business mileage driven in a year; however, since April 2002, the system changed so that the level of tax now varies according to the level of the company car's carbon dioxide (CO₂) emissions, measured in grams per kilometre (g/km). The higher the car's emissions, the higher its tax liability.

Working Out Your Tax Liability

• Find out your company car's carbon dioxide emissions in grams per kilometre (g/km).
• Use the table (below) to look up the tax liability percentage this equates to. For example in 2006/7 a petrol car with a CO₂ emission of 180 g/km equates to 23%. Diesel cars attract a 3% supplement on petrol percentages (capped at 35%), so a diesel with the same 180 g/km CO₂ emission will equate to 26%.

• Alternative-fuel cars have lower tax liability than respective petrol cars.
  • Petrol-electric hybrids: deduct 2% tax, plus 1% for every 20 g/km of carbon dioxide emissions below 140g/km
  • Electric cars: deduct 6%
  • LPG and CNG bi-fuel cars: deduct 1% plus a further 1% for every 20 g/km of carbon dioxide emissions below 140 g/km

• You will then need to find out your car's P11D price; this is the list price including any options, but excluding the cost of first registration and road tax.
• Multiply the car's P11D price by the tax liability percentage.
• Multiply this figure by your rate of income tax: 22% (basic) or 40% (higher rate) to find your company car tax bill.
• For example, if you have a company car with P11D price of £15,000, a CO₂ emission of 180 g/km resulting in a percentage rate of 23%, and you pay the basic tax rate of 22%, the calculation would be as follows:

£15,000 x 23% x 22% = £759