Car Benefit in Kind Tax Calculation
This system changed on 6th April 2002. The previous system was based
on a mileage system. Responding to the environmental concerns about
the ozone layer, and global warming, governments worldwide committed
to reduce the output of greenhouse gases. This includes reducing Co2
emissions. The government began this process by providing a
financial incentive to switch to cleaner cars by lowering vehicle
excise duty on low emission cars.
The charge for benefit in kind taxation is based on graduated
percentages based on Co2 emissions starting from 15% to 35% of the
cars P11d price (emissions bands are in increments of 5g/km). Diesel
cars have a flat 3% penalty which needs to be added onto the
percentage relating to the co2 emissions.
The calculation is as follows to find the monthly cost:-
% relating to the Co2 emissions x P11d value x 22% or 40% personal
tax liability
12 months
Or click on the links below:-
www.hmrc.gov.uk/calcs/cars.htm
www.whatcar.co.uk/company-car-tax.aspx
www.theaa.com/allaboutcars/companycartax/cartax_input.jsp?page=cartax
Points to Remember:-
1. Always check the CO2 emissions and P11d value, to make sure you
are happy with the predicted benefit in kind taxation on the vehicle
before you enter into any financial agreement.