NUMBERS GUIDE

A COMPANY car is essential for many drivers’ work, but it’s seen as a perk by Her Majesty’s Revenue & Customs. The Government calls it a Benefit in Kind (BIK) and, therefore, liable to tax.

The amount of salary you have to sacrifice with a company car depends on a number of factors, including the model’s CO2 emissions and P11D value. The latter is essentially the price of the car, including any options, minus the non-taxable costs such as the registration fee and the first year’s road tax (VED).

There are currently 29 Benefit-inKind (BIK) bands, each based on a model’s CO2 emissions. The lowestpolluting cars attract a 13 per cent BIK rate, while vehicles with the highest emissions are levied at 37 per cent.

Until relatively recently, electric cars were exempt from these BIK charges, but these zero-emissions machines are now taxed at the lowest 13 per cent rate. Crucially, this figure is set to increase each year, and by 2019 battery-powered models will be levied at 16 per cent.

It’s also worth keeping in mind that diesel models have a four-per-cent surcharge over petrol versions with the same emissions. So make sure you do enough miles that the fuel savings a diesel offers outweigh the bigger BIK bills you can expect to pay.

As our panel on Page 34 explains, the final part of the company car cost calculations involves your salary. If you fall into the 20 per cent income tax bracket, you’ll pay 20 per cent of the P11D value, while higher-rate earners will fork out 40 per cent.

“There are currently 29 BIK bands, each based on a model’s CO2 emissions”