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Tax and the company car pt 2

Tax-free benefits

    Car Parking

The provision of a car parking space at or near the employee's place of work is not an assessable benefit.

    Pool Cars

There is no tax for using a pool car. This is one where private use is merely incidental to the business use, and it is not normally used by one employee to the exclusion of all others.

Please note: A pool car must not normally be kept overnight at or near an employee's home.

Business use of an employee's own car

It is quite normal practice for employees to be reimbursed at a reasonable mileage rate for business use of their own cars.

A statutory system of tax and national insurance free mileage rates applies for business journeys in employees' own vehicles, as follows:

Cars and vans
On the first 10,000 miles in the tax year 45p per mile
On each additional mile above this 25p per mile
Motor cycles 24p per mile
Bicycles 20p per mile

It is no longer possible to make a claim for tax relief based on actual receipted bills, nor claim capital allowances or interest on loans related to car purchases.

Note that the lower rate for more than 10,000 business miles only applies to income tax. The national insurance rate remains at 45p for any number of miles.

Unless the employee is reimbursed at a rate higher than the statutory mileage rate, the payments do not need to be reported on a P11D (now possible through RTI payrolling).

Passenger payments

When an employee travelling on business carries fellow employees as passengers he may be reimbursed a further 5p per passenger tax free provided the journey is a business journey in respect of the passengers. No claim can be made if the employer does not make passenger payments.

Company vans

The taxable benefit for the unrestricted use of company vans is £3,350 (with no reduction for older vans) plus a further £633 of taxable benefit if fuel is provided by the employer for private travel. Electric vans are taxed at 40% of the van scale rate (i.e. £1,340).

The tax payable on the use of a company van ranges from £268 to £1,792.35 a year, and the employer's class1A NICs payable ranges from £87.35 to £549.65 a year.

Use our calculator to check your van benefit

Tax-saving checklist

  • Keep adequate records of business mileage.
  • Always check your tax code to see that the correct benefit is being applied.
  • If you have low private mileage, you may be better off if you pay for all your own private fuel.
  • If you have high business mileage, it may be better to use your own car and claim "mileage" from your employer.
  • Encourage your employer to apply for a P11D dispensation.

Company cars - beyond 2018

  • The taxable benefits tables have also been published for the tax year, 2019/20 to 2020/21.
  • These increase the percentages in 2019/20 for each band of emissions by 2% and 3% respectively. The maximum benefit rate remains at 37%.
  • From 6 April 2020, cars propelled wholly by electricity will reduce to a 2% benefit in kind. Lower rates will also apply to hybrid cars with emissions of between 1 and 50 g/km, based on the range of the electric motor.

Taxable benefit for 2018/19

CO2 emissions (g/km)* Petrol Diesel
0 to 50 13% 16%
51 to 75 16% 19%
76 to 94 19% 22%
95 to 99 20% 23%
100 to 104 21% 24%
105 to 109 22% 25%
110 to 114 23% 26%
115 to 119 24% 27%
120 to 124 25% 28%
125 to 129 26% 29%
130 to 134 27% 30%
135 to 139 28% 31%
140 to 144 29% 32%
145 to 149 30% 33%
150 to 154 31% 34%
155 to 159 32% 35%
160 to 164 33% 36%
165 to 169 34% 37%
170 to 174 35% 37%
175 to 179 36% 37%
180 and over 37% 37%

*The exact CO2 figure is rounded down to the nearest 5g/km.