Calculating the tax on company cars

Our experts explain how to calculate the tax due on your employees’ company cars

Our experts at DSR Tax Claims know how hard it is to find good, quality information about HMRC’s tax regulations that is easy to understand, and that’s why we have created these handy guides to tell you everything you need to know. Our aim is to make life easier for our clients and that is why we want to share our expertise with you. You can also call our friendly team on 0330 122 9972 – we’re the tax experts you can trust. Or you can check out our online calculator to see if you could be due a refund.

How do you calculate the tax on company cars?

If you provide company cars or fuel for your employees to use outside of work for their own private use, you will need to work out the taxable value of this because HMRC consider this to be a taxable benefit. You will need to report this to HMRC and you might also need to deduct additional tax as a result.

HMRC considers private use to include your employees’ journeys between work and home (their daily commute) unless they are travelling to a temporary workplace that isn’t their usual place of work.

There are a number of ways to calculate the value of the benefit you are providing to your employees. If you use commercial payroll software in your business, you can calculate taxable value by using that. There is also an online calculator on the HMRC website called the ‘company car and car fuel benefit calculator’ which you can use to calculate the taxable value. If you are trying to calculate the value of an electric car, you need to select the fuel type ‘E’.

You can also calculate the value manually. HMRC provides a working sheet (P11D working sheet 2) to help you. This is the only method you can use if both of the following circumstances apply:

  • You were providing fuel for private use but stopped doing this part way through a tax year
  • The car was unavailable for the employee to use for at least 30 consecutive days

What is the taxable value of a car?

To calculate the taxable value of a company car, you don’t just take its value into account. There are other factors to consider as well. As far as HMRC are concerned, the taxable value also depends on its fuel type and CO2 emissions as well as the amount of time the car is unavailable during that tax year (for example, if it has developed a mechanical fault and is off the road for repair).

How can DSR Tax Claims help?

We aim to make life as simple as possible for our clients and that includes giving you the information you need to make your taxes (and your life) simpler and less stressful.  Our team of experts at DSR Tax Claims are always on hand to help our clients and our excellent standing with HMRC means that we can make sure you don’t fall foul of their regulations, while claiming your maximum tax rebate. We can even take care of all that paperwork and deal with HMRC on your behalf too. Call our friendly team on 0330 122 9972 – we’re the tax experts you can trust.

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