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Published Date: 06/11/2017

A company car is a fantastic perk that many Brits enjoy as part of their job. But in life, there’s no such thing as a free lunch. So if you’re one of the lucky Brits who have one, you’ll have to pay tax out of your monthly salary on this benefit.

The car you choose will make all the difference, because not all company cars were created equal when it comes to taxation.

When you’re deciding which company car to opt for, there are three things you’ll need to know: its P11D value, its approved CO2 figure, and which income tax band you fall into. The lower the P11D value and CO2 figures are, the less tax you’ll pay.

P11D values

The P11D value is the car’s list price, plus any delivery charges, optional extras and VAT, but excluding road tax and the first registration fee. Any discount you have been able to secure from your dealer will not be taken into account when calculating your tax obligations. 

With this in mind, some car manufacturers are creating special trim levels especially aimed at business drivers. These cars are often equipped with desirable features for people who spend extended periods in their car (like cruise control and satellite navigation), but have low P11D values – essentially, building in any discount ‘up front’.

Toyota is among them, and has created the Business Edition trim for the Auris, Avensis, RAV4 and Prius.

CO2 ratings

Your chosen car’s CO2 figure will fall into a percentage band. Diesel vehicles are subject to a 3% surcharge, and the percentage rate for each band is reviewed annually by HM Revenue & Customs (to ensure revenues are maintained as cars become less polluting). 

NB: the given rates are for the 2017/18 tax year.

CO2 emissions (g/km)

BIK rate (%) - Petrol

BIK rate (%) - Diesel

0-50

9

12

51-75

13

16

76-94

17

20

95-99

18

21

100-104

19

22

105-109

20

23

110-114

21

24

115-119

22

25

120-124

23

26

125-129

24

27

130-134

25

28

135-139

26

29

140-144

27

30

145-149

28

31

150-154

29

32

155-159

30

33

160-164

31

34

165-169

32

35

170-174

33

36

175-179

34

37

180-184

35

37

185-189

36

37

190+

37

37


Income tax bands

Everyone falls into one of three income tax bands. Which you fall into will depend on your total earnings. For most people, this is the same as your annual salary.

Total income

Tax band

£0 - £45,000

Basic Rate (20%)

£45,001 - £150,000

Higher Rate (40%)

£150,001+

Additional Rate (45%)


Calculating your tax obligations

You can calculate how much tax you’ll pay each year by applying these figures to a simple formula:

(P11D value x CO2 band %) x Income tax rate %

So let’s look at a few examples:

Scenario 1:

You’re a Basic Rate tax payer and choose a Toyota Auris 1.2 petrol turbo with a manual gearbox, in the Business Edition trim. This has a P11D value of £20,740 and CO2 emissions rated at 112g/km. This puts it in the 21% BIK band.

(21% of £20,740) x 20% = £871.08

Scenario 2:

You’re a Basic Rate tax payer and choose a Toyota Prius 1.8 petrol hybrid, in the Business Edition trim. This has a P11D value of £24,945 and CO2 emissions rated at 70g/km. This puts it in the 13% BIK band.

(13% of £24,945) x 20% = £648.57

Scenario 3:

You’re a Higher Rate tax payer and choose a Toyota GT86 in Pro Nav trim, with a manual gearbox. This has a P11D value of £27,900 and CO2 emissions of 180g/km. This puts it into the 35% BIK band.

(35% of £27,900) x 40% = £3,906.00

Ask a member of the team

Contact the Fleet expert at your local Inchcape Toyota outlet to discuss options and identify the perfect model, while minimising your tax obligations. 

 

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