How do I work out the tax on my employees’ company cars?

20th February 2020 Tax CHW Accounting

As an employer, if you provide company cars or fuel for your employees’ private use, you’ll need to work out the taxable value so you can report this to HM Revenue and Customs (HMRC).

‘Private use’ includes employees’ journeys between home and work, unless they’re travelling to a temporary place of work.

You can calculate taxable value using commercial payroll software or you can use HMRC’s online company car and car fuel benefit calculator.

If you use HMRC 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.

Choose type ‘A’ for all other cars – you can check a car’s CO2 emissions on the website too.

For electric cars and other cars with CO2 emissions of 75 grams per kilometre or less, answer ‘no’ to the question ‘is the car provided via an optional remuneration arrangement?’

You can also work out the value manually on P11D working sheet 2 which can be found online. If the car was unavailable for at least 30 consecutive days and you were providing fuel for private use, but stopped doing this then you will have to use this method.

The taxable value of a car is not the same as its cost. The taxable value also depends on the car’s fuel type and level of CO2 emissions and the amount of time the car is unavailable during the tax year (for example, because of a mechanical fault).

For more advice on your businesses company cars please contact us.

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