Benefit in Kind Tax Calculator

How to use this calculator

1. Use the list price, not what was paidP11D price includes VAT, delivery and factory options at list. Any discount the employer negotiated does not reduce your benefit.
2. Find the appropriate percentage for the carIt depends on CO2 emissions, and for plug-in hybrids on electric range. The vehicle's own data will give you the CO2 figure.
3. Set your marginal rateThe benefit sits on top of your salary, so it is taxed at the rate you pay on your top pound — not your average rate.
4. Check the fuel benefit break-evenFree private fuel is taxed on a fixed multiplier regardless of usage, so it is only worth having if your private fuel bill is larger than the tax.

Taxed on list price, not on cost

The company car benefit is not based on what the car costs the employer. It is a percentage of the manufacturer's list price, and the percentage is set by emissions.

That single design decision explains almost everything counter-intuitive about company car tax.

Two cars costing the employer the same monthly amount can produce wildly different tax bills, because one has a high list price and low emissions and the other the reverse. A discounted car is taxed on the undiscounted price. A car bought second-hand is still taxed on its original list price when new.

The percentage range is enormous — from low single figures for a pure electric car to the high thirties for a large petrol or diesel. Applied to the same £35,000 list price, that is the difference between a few hundred pounds of tax a year and several thousand.

That gap is deliberate policy, and it has been extremely effective at moving company fleets to electric. It is also why company cars went from a near-universal perk to a niche one for combustion vehicles, and are now returning rapidly for EVs.

The tax is normally collected by adjusting your tax code rather than as a separate deduction. Your personal allowance is reduced by the value of the benefit, so more of your salary is taxed. That is why taking a company car often reduces take-home by more than people expect — the change appears as a smaller allowance rather than an itemised charge.

Employees pay no National Insurance on most benefits in kind, which is a genuine advantage over the equivalent salary. The employer pays Class 1A instead, at the employer NI rate, on the same taxable value.

Two adjustments reduce the benefit. A capital contribution — a one-off payment toward the car — reduces the price used in the calculation, capped at £5,000. And payments you make for private use reduce the benefit pound for pound, provided they are actually made in the tax year and required as a condition of the car.

A car that is genuinely unavailable for part of the year is apportioned by the number of days it was available, which matters when a car is delivered or returned mid-year.

Worked example: a £35,000 car at 27%

The taxable benefit is £35,000 × 27% = £9,450.

For a higher-rate taxpayer at 40%, the tax is £3,780 a year — £315 a month.

A basic-rate taxpayer on the same car pays £1,890, and an additional-rate taxpayer £4,252.50.

The employer pays Class 1A National Insurance of £9,450 × 15% = £1,417.50 on top.

So the car costs the higher-rate employee £3,780 and the employer £1,417.50 in tax alone, before the lease itself.

Now compare an electric car at 3%. The same £35,000 list price gives a benefit of £1,050, so the higher-rate tax is £420 a year — £35 a month. That is a ninth of the combustion car's bill for the same list price.

That ratio is the whole argument for an EV company car, and it is why salary sacrifice schemes work at all.

Now the fuel benefit. If the employer also pays for private fuel, the charge is a fixed multiplier — £28,200 — times the same 27% percentage. That is £7,614 of extra benefit, taxed at 40% for £3,045 a year.

Crucially, that figure does not depend on how much private fuel you actually use. Whether you drive 2,000 private miles or 20,000, the tax is the same.

So the break-even is straightforward. At £1.40 a litre, £3,046 of tax buys about 2,175 litres of fuel, which at 40 miles per gallon covers roughly 19,100 private miles. Below that, the fuel card costs you more than buying your own fuel.

Most drivers are well below it, which is why company fuel cards for private use have largely disappeared. If yours is still in place, this is the calculation to run — and if the answer is negative, ask to give it up and reimburse private mileage instead.

A capital contribution changes the picture modestly. Paying £5,000 toward the £35,000 car reduces the price used to £30,000, cutting the benefit to £8,100 and the higher-rate tax to £3,240 — a saving of £540 a year, or £1,620 over three years for a £5,000 outlay. That only makes sense if you would have spent the money anyway.

Annual tax by benefit percentage on a £35,000 car

The vehicle descriptions are broad guides only — the actual percentage depends on the specific CO2 figure and, for plug-in hybrids, on the electric-only range. Check the car's own data. The point of the table is the spread: the same list price produces a twelve-fold difference in tax across the range.

Other benefits, payrolling and what to check

Most benefits other than cars are valued at the cost to the employer. Private medical insurance is taxed on the premium, a gym membership on what the employer pays, and a company mobile phone is exempt entirely if it is a single phone provided under the employer's own contract.

A few have their own statutory formulas. Living accommodation, beneficial loans above £10,000, and vans all use specific rules rather than simple cost. Vans in particular have a flat benefit charge rather than a percentage of price, which usually makes a van far cheaper to run as a company vehicle than an equivalent car.

The trivial benefits exemption covers small gifts under £50 that are not cash, not a reward for work and not contractual. Directors of close companies have an annual cap on these.

Payrolling benefits is increasingly common. Rather than reporting on a P11D after the year end and adjusting your tax code, the employer taxes the benefit through payroll in real time. It is more accurate and avoids the lag, and the government has been moving toward making it mandatory.

If your benefits are not payrolled, watch your tax code. HMRC estimates the benefit from the previous year's P11D, so a car changed mid-year or given up entirely can leave a code that is wrong for months. Checking it through a personal tax account takes minutes and prevents both a surprise bill and an unnecessary overpayment.

The optional remuneration rules apply where a benefit is taken instead of salary. Broadly, the taxable amount is the higher of the benefit value and the salary given up — which removes the tax advantage of most salary sacrifice arrangements. Cars with emissions of 75g/km or below are specifically exempt from those rules, which is precisely why electric salary sacrifice car schemes work and equivalent petrol schemes do not.

On giving up a car: if you are offered a cash allowance instead, compare properly. The allowance is ordinary salary, taxed and subject to National Insurance at your marginal rate, and you then fund the car, insurance, servicing and depreciation yourself. For an electric car at a low benefit percentage the company car usually wins comfortably; for a high-emission car it usually does not.

Assumptions and limitations

• Percentages, the fuel multiplier and the Class 1A rate change each April
• The appropriate percentage depends on the specific CO2 figure and electric range — check the vehicle data
• Does not apply the specific formulas for vans, accommodation or beneficial loans
• Assumes a single marginal rate — a large benefit can push you into a higher band
• Does not model the optional remuneration rules for non-exempt sacrifice arrangements
• Apportions by whole months rather than by days
• Not tax advice — check your tax code and P11D against your own circumstances

Questions people ask about this in United Kingdom