An important part of choosing the right company car is knowing how much it will cost you in Benefit in Kind tax.
A contract lease hire car is a cost effective route to driving a modern well-maintained vehicle and it makes financial sense to ensure your company lease car fulfils your needs while minimising your benefit in kind tax liability.
How to Calculate Your Company Car Benefit in Kind Tax Liability
Once you have established the list price of your lease hire car, select the appropriate percentage based on the CO2 emissions level of your vehicle, remember to adjust for diesel engines, then multiply the list price by the appropriate percentage to obtain your benefit in kind figure. Then reduce this by any contribution that you pay to your employer in respect of the car. You pay benefit in kind tax on the balance based on your marginal rate of income tax.
All Bussey Vehicle Leasing examples of benefit in kind tax exclude any personal contribution towards the vehicle.
List price of car (including VAT and accessories)
For the purposes of P11D the ‘list price of the car’ is not the purchase price of the vehicle but the total of:
- The UK list price of the car on the day before the date of first registration, including VAT, and delivery charges, plus
- The list price including VAT of any optional accessories with the car when it was first made available, plus
- The price including VAT of any accessories added to the car after it was first made available which had a list price of £100 or more.
More detailed information about P11d is available from HMRC.gov.uk where there is also a P11D calculator.
Lease Vehicle Example:
Ford Mondeo 2.0TDCi 140 Titanium X Business Edition 5 Door with Metallic Paint
% for 119g/km Diesel: 18%
Indicative P11D: £23,780.00
Example of Taxable Benefit
£23,780 x 18% = £4,280.40 x marginal rate of taxation 20% = £856.08 per annum or £71.34 per month
For 40% marginal rate of taxation £23,780 x 18% = £4,280.40 x 40% = £1,712.16 per annum or £142.68 per month.
Forthcoming changes to the car benefit rules
The car benefit charge for a full year is obtained by multiplying the price of the car for tax purposes (in most cases, its list price plus accessories, less capital contributions) by the ‘appropriate percentage’.
This page records changes to the car benefit rules which take effect from 2013-14 onwards.
Changes from 2013-14
The lower threshold has been reduced from 120g/km to 115g/km.
The lowest appropriate percentages are still 0 per cent and 5 per cent. 10 per cent will now apply to cars with CO2 emissions of 76g/km to 94g/km.
The appropriate percentage will increase by 1 per cent for all vehicles with CO2 emissions between 95g/km and 215g/km, to a maximum of 35 per cent.
Changes from 2014-15
The lower threshold will be reduced from 115g/km to 110g/km.
The lowest appropriate percentages are still 0 per cent and 5 percent. 11 per cent will now apply to cars with CO2 emissions of 76g/km to 94g/km.
The appropriate percentage will increase by 1 per cent for all vehicles with CO2 emissions between 95g/km and 210g/km, to a maximum of 35 per cent.
Changes from 2015-16
The appropriate percentage for zero emission cars reverts to 9 per cent unless this figure is changed in any future announcement.
The special rules for cars with CO2 emissions not exceeding exactly 75g/km will be abolished.
How to Calculate Benefit in Kind tax Liability For Private Fuel
If you receive private fuel from your employer then you will be subject to benefit in kind taxation.
The method of calculation is similar to company car taxation, but whereas in company car the calculation uses the P11D value of the vehicle, for fuel the reportable value of fuel provided for private use in a company car is calculated as a percentage of a fixed sum – £20,200 in the tax year 2012-13, and £21,100 in the tax year 2013-14.
The percentage is the same as the one used to calculate car benefit – in general, it varies depending on the car’s CO2 emissions.
The reportable figure for car fuel benefit can be reduced:
- if a car is unavailable to an employee for a minimum of 30 consecutive days
- if you withdrew the provision of fuel for private use during the year and didn’t reinstate it
Please remember you cannot make a reduction for the same day twice – that is, both as a day that the car was unavailable, and as a day after private fuel provision had been withdrawn.
Lease Vehicle Example:
Ford Mondeo 2.0TDCi 140 Titanium X Business Edition 5 Door
% for 119g/km Diesel: 18%
2013/14 fixed sum: £21,100
Calculation £21,100 x 18% = £3,798 x marginal rate of taxation 20% = £759.60 per annum or £63.30 per month
For 40% marginal rate of taxation, £3,798 x 40% = £1,519.20 per annum or £1,26.60 per month
Costing Additional Extras For Your Vehicle
To calculate the approximate cost of adding extras to your vehicle.
- Select the vehicle from the search buttons on the home page.
- Click on full details
- Click on the options tab to view additional extras
- Select the extra/extras required and divide the price of any extras inc VAT by the number of months of your contract.
Ford Kuga 2.0 TDCi Zetec 140ps AWD with metallic paint
36 month contract, 10,000 miles per annum
Contract hire rental £279.64 + VAT per month
Ford DAB Audio Navigation System
Price inc VAT £750.00
Contract Term 36 months
Approximate month cost of extras £750 / 36 = £20.83
Revised monthly rental £279.64 + 20.83 = £300.47 + VAT per month.
Please note that the P11d value of the vehicle will increase by the price inc VAT of additional extras
Remember that some additional extras will enhance the residual of the vehicle.
For an exact quotation please contact us on 01603 909 968 and we will be delighted to calculate this for you.