When you get a brand new company car via one of our business leasing deals, we’ll take care of almost everything. The car will come in pristine condition, your monthly payments will all be arranged through your company, and even annual VED rates, maintenance and servicing can be covered.
One thing we won’t sort is your company car tax. That’s a cost that will be paid separately from your agreement with us, so it’s good to know how much it’s likely to be and what cars could help you save on it.
Our company car tax calculator guide will tell you all you need to know.
To work out how much tax you’ll pay on a company car, first you need to know the car’s total value. This is then multiplied by a tax rate based on its CO2 emissions, called a BIK (benefit in kind) rate. Finally, that’s multiplied by your income tax rate - 20% for lower rates, 40% for higher rates and 45% for additional rates.
For example, if your new car lease deal was worth £20,000, with a BIK rate of 15% and an income tax rate of 20%, you’d pay company car tax of £600 a year (20,000 x 0.15 x 0.20).
Your company car tax payments will come out of your company’s PAYE system, with your tax code being updated to reflect the new benefit. It’s your responsibility to let HMRC know that you’ve got a company car so that they can update this.
Your company car tax band will depend on the amount of CO2 it emits. For cars that produce more CO2, you will pay a higher rate, while cars with low emissions such as electric and hybrid vehicles can expect to pay much less.
See the below table for our full list of company car tax rates for the 2022/2023 financial year and beyond.
|CO2 emissions g/km||Electric range||2022/23||2023/24||2024/25|
|170 or more||37||37||37|
Cars that produce low or zero carbon emissions, such as electric and hybrid cars, can expect to save considerable sums on their company car tax. What's more many of these cars are road tax exempt.
For the year 2020, tax on cars with zero emissions was 0%, but this has increased to 1% in 2021 and 2% in 2022. Still, there are considerable savings to be made, especially when coupled with our electric and hybrid leasing deals.
When it comes to what car is best for company car tax, it looks like green is the way to go.