Sylvie Willis
If you're an employer providing company cars or fuel for your employees' personal use, you'll need to calculate the taxable value to report to HM Revenue and Customs (HMRC). The taxable value of a car depends on the amount of time the car is unavailable during the tax year and the car's CO2 emissions. You can calculate the taxable value manually on P11D working sheet 2, or by using commercial payroll software or HMRC's company car and car fuel benefit calculator. To calculate the tax you'll pay, multiply the P11D value by the benefit-in-kind (BIK) percentage banding, then multiply that figure by your tax band. The BIK tax is evaluated by multiplying the car’s CO2 emission level, the value of the car when new, and your income tax bracket.
| Characteristics | Values |
|---|---|
| Who needs to calculate the tax | Employers who provide company cars or fuel for their employees' private use |
| How to calculate the tax | Using commercial payroll software or HMRC's company car and car fuel benefit calculator |
| Factors that determine the tax | CO2 emissions, fuel type, taxable price, income tax bracket, vehicle's value when new, vehicle's benefit in kind (BIK) |
| Fuel benefit charge | Calculated by multiplying the fuel benefit charge multiplier by the car's appropriate percentage (derived from CO2 emissions) |
| Fuel benefit tax exemption | Drivers of electric cars with employer-paid charging for personal mileage |
| Van Fuel Benefit Charge for 2023/24 | £757, multiplied by the personal income tax band |
| Fuel allowance | What an employer pays or reimburses for mileage driven for business activities |
| Tax exemption for fuel cards | Fuel cards used for business trips only are not taxed |
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What You'll Learn
Calculating taxable value
As an employer, providing company cars or fuel for your employees' private use requires you to calculate the taxable value for reporting to HM Revenue and Customs (HMRC). 'Private use' encompasses employee commutes between home and work unless they are travelling to a temporary place of work.
Calculating the taxable value can be done through commercial payroll software or HMRC's company car and car fuel benefit calculator. For diesel cars meeting the Euro 6d standard (Real Driving Emissions 2), select fuel type 'F', 'D' for other diesel cars, and 'A' for all other car types.
The taxable value of a car differs from its cost and is influenced by factors such as the amount of time the car is unavailable during the tax year due to mechanical faults or other reasons. Additionally, the taxable benefit for fuel depends on the type of vehicle and fuel used.
To calculate the taxable benefit for company cars, also known as Benefit in Kind (BIK) tax, you can use the vehicle's BIK percentage and the car fuel benefit charge multiplier. This multiplier is set by HMRC and can change annually. The BIK percentage is influenced by the car's CO2 emission level, its value when new, including any modifications, and your income tax bracket. By multiplying the BIK percentage by the car fuel benefit charge multiplier, you can estimate the annual tax payable.
Alternatively, you can use the P11D working sheet 2 to calculate the taxable value manually. This involves multiplying the P11D value by the BIK percentage banding and then by your tax band. It's important to note that using a fuel card exclusively for business trips is not considered a taxable benefit.
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Calculating tax for electric cars
As an employer, if you provide company cars or fuel for your employees' private use, you must determine the taxable value and report it to HM Revenue and Customs (HMRC). This includes employees' journeys between home and work, unless they are travelling to a temporary place of work.
To calculate the taxable value, you can use commercial payroll software or HMRC's company car and car fuel benefit calculator. When using the calculator, select fuel type 'F' for diesel cars that meet the Euro 6d standard (also known as Real Driving Emissions 2). Choose type 'D' for other diesel cars, and type 'A' for all other cars.
For electric cars and other vehicles with an approved CO2 emissions figure of 75g/km or less, answer 'no' to the question 'is the car provided via an optional remuneration arrangement?'. If your car has an approved CO2 emissions figure of 1 to 50g/km, you must also provide the 'zero-emission mileage' or electric range. This is the distance the car can travel on electric power before requiring recharging. You can find the zero-emission mileage figure on your vehicle's certificate of conformity, if you own the car.
Additionally, drivers of electric cars who have their charging costs for personal mileage paid for by their employer are exempt from paying fuel benefit tax.
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Calculating tax for commercial vehicles
If you provide company cars or fuel for your employees' personal use, you must determine the taxable value to report to HM Revenue and Customs (HMRC). This includes employees' commutes between home and work, unless they are travelling to a temporary workplace.
You can calculate the taxable value using commercial payroll software or HMRC's company car and car fuel benefit calculator. Here, you can select the appropriate fuel type: 'F' for diesel cars that meet the Euro 6d standard (also known as Real Driving Emissions 2), 'D' for other diesel cars, and 'A' for all other cars. For electric cars and other vehicles with approved CO2 emissions of 75g/km or less, answer 'no' to the question, 'Is the car provided via an optional remuneration arrangement?'.
The taxable value of a car is not the same as its cost and can depend on the amount of time the car is unavailable during the tax year due to mechanical faults or other reasons.
For drivers of commercial vehicles whose employers pay for fuel used for personal mileage, a fuel benefit tax must be paid. The Van Fuel Benefit Charge for the 2023/24 tax year is £757, as set by HMRC. To calculate the tax payable, multiply £757 by your personal income tax band. For example, a 20% taxpayer would pay £151 per year. Alternatively, you can use the Commercial Fleet Van Tax Calculator to estimate the tax owed.
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Using a company car tax calculator
If you're an employer, you'll need to calculate the taxable value of any company cars or fuel you provide for your employees' private use. This includes journeys between home and work, unless they're travelling to a temporary place of work.
There are several ways to calculate the taxable benefit of a company car. The HMRC provides a company car and car fuel benefit calculator. Here, you can input the fuel type, which depends on the type of car and its CO2 emissions. For example, choose fuel type 'F' for diesel cars that meet the Euro 6d standard, also known as Real Driving Emissions 2. For all other cars, choose type 'A'. For electric cars and other cars with a CO2 emissions figure of 75g/km or less, answer 'no' to the question, 'Is the car provided via an optional remuneration arrangement?'.
Alternatively, you can calculate the taxable benefit manually on P11D working sheet 2. The taxable value of a car is not the same as its cost and depends on the amount of time the car is unavailable during the tax year. For example, if the car is unavailable due to a mechanical fault.
If your employee drives a commercial vehicle and you pay for their fuel for personal mileage, they will have to pay fuel benefit tax. The Van Fuel Benefit Charge is set by HMRC and is a fixed amount. To calculate the tax you'll pay, multiply the set charge by your personal income tax band. For example, for the 2023/24 tax year, the Van Fuel Benefit Charge was £757. A 20% taxpayer would pay £151 per year. You can also use the Commercial Fleet Van Tax Calculator to see how much you'll pay.
If your employee drives an electric car and you pay for charging that's used for personal mileage, they do not have to pay fuel benefit tax.
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Calculating tax manually
If you are an employer who provides company cars or fuel for your employees' personal use, you will need to calculate the taxable value to report to HM Revenue and Customs (HMRC).
You can calculate the taxable value manually on P11D working sheet 2. The taxable value of a car is not the same as its cost. The taxable value also depends on the amount of time the car is unavailable during the tax year (for example, because of a mechanical fault).
To calculate the company car tax, or benefit-in-kind (BIK) tax, multiply the P11D value by the BIK percentage banding, then multiply that figure by your tax band. The BIK percentage is multiplied by the car fuel benefit charge multiplier, which is controlled by HMRC and can change each year. For the 2023/2024 tax year, the car fuel benefit charge multiplier was £27,800.
For example, if your BIK percentage was 25%, as your petrol vehicle falls into the 105-109 CO2 bracket, then you’d multiply 0.25 (25%) by 27,800 to reach £6,950.
If your employer pays for your company car and you use it full time, you'll need to pay the company car fuel benefit. If you are spending under £1390 a year on fuel, the car fuel benefit is perhaps not worth it, as you’d still have to pay the calculated amount. This all depends on how many miles you’re driving. If you are on average paying out more for fuel than the car fuel benefit amount, then having a company car and receiving free fuel is worth it.
There is currently no fuel benefit charge for cars powered by electricity.
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Frequently asked questions
As an employer, if you provide company cars or fuel for your employees' private use, you need to calculate the taxable value and report this to HM Revenue and Customs (HMRC). You can calculate the taxable value using commercial payroll software or HMRC's company car and car fuel benefit calculator.
The taxable value of a car is not the same as its cost. The taxable value depends on the amount of time the car is unavailable during the tax year (for example, because of a mechanical fault). You can work out the value manually on P11D working sheet 2.
The fuel benefit charge is calculated by multiplying the fuel benefit charge multiplier by the car's appropriate percentage (the CO2 emissions-derived percentage used to calculate the car benefit charge). The fuel benefit charge is reduced to nil if the employee pays for all private fuel. A proportionate reduction is made if the company car is only available for part of the year, where private fuel ceases to be provided, or where the benefit of the car is shared.
