How Is Company Car Tax Calculated in The UK?

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how is company car tax calculated

Business owners who use company cars for work, or employees who need a company car for their job, will be aware of the costs involved with using them. This article will break down what is involved in calculating the amount of tax on your company car.

How Is Company Car Tax Calculated in The Uk?

What is Company Car Tax?

What is Company Car Tax

The company car tax is a tax levied on the value of a company’s cars. The tax is based on the vehicle’s taxable value, which is calculated using a formula that takes into account factors such as the make and model of the car, its fuel type and age. The tax is then divided by the car’s estimated annual mileage.

There are a number of deductions that can be made from the taxable value, including for business use, private use and depreciation.

The company car tax can be a significant expense for businesses, so it’s important to take account of it when planning budgeting and taxation.

When Should You Pay Company Car Tax?

When Should You Pay Company Car Tax

If you’re a company car driver in the UK, you’ll likely be aware of the importance of paying company car tax on every mile you drive.

But just how is company car tax calculated in the UK? And when should you be paying for it? Here’s a quick guide to company car taxation in the UK.

When calculating your company car tax liability, the Government takes into account a number of factors. These include the type of vehicle you’re driving (ie van or car), your income and whether or not you use your car for work purposes only. You also have to account for any other benefits – such as fuel allowances – that may apply.

There are several ways to calculate your company car tax liability, depending on your situation. You can use an online calculator, visit HM Revenue and Customs (HMRC) or contact them via telephone.

In most cases, you’ll need to self-assess your company car tax using one of these methods and provide documentation to support your claim.

It’s important to remember that paying company car tax is mandatory in the UK, and failing to do so could result in penalties and even legal action. So make sure you’re up to date with your tax payments and keep a record of all the receipts you’ve paid.

If you’re having trouble with this, or want to find out more, then feel free to contact us on the details below, or alternatively call in your company car tax claim today.

How is Company Car Tax Calculated?

How is Company Car Tax Calculated.

The company car tax in the United Kingdom is calculated on an annual basis according to the following formula:

Annual Company Car Tax = 100% of the market value of the car at the beginning of the year + 8% of that market value.

The Rules for Company Car Tax

The Rules for Company Car Tax

The UK operates a graduated system of company car tax, which means that the tax payable on a car depends on its value.

The following table sets out the rates of company car tax in the UK (as of 1st April 2017):

Occupation band A band B band C band D band E band F band G band H Band I rate £0-£18,000 10% £18,001-£60,000 12% £60,001-£125,000 15% £125,001-£250,000 20% £250,001+ 25%

The above table shows that there are seven different company car tax bands in the UK. The rate for each band is determined by the value of the car within that band.

For example, a car with a value of £60,000 would fall into Band D (15%) and would therefore be subject to company car tax at this rate.

Cars with a value above £60,000 would fall into one of the higher bands and would therefore be subject to company car tax at a higher rate.

In addition to paying company car tax on a car’s value, you will also need to pay a VAT number (Value Added Tax) on the purchase price of the car.

Motor vehicle excise duty is a tax that has been introduced by the UK government to recoup money lost when replacing old and polluting cars with new and environmentally-friendly models. The rate of MVE is based on the value of the car and will affect every vehicle registered after 1 April 2006.

Unlike company car tax, MVE can be claimed in advance, but only at a set rate of £30 per year – making it an expensive tax to claim; however, this amount goes down as income rises. This tax is paid annually rather than by calculation of value like company car tax.

Mileage allowances are also available for certain vehicles in order to reduce how much you pay for your fuel each year. This is set at £0 for cars and vans with six wheels, and £3 for all other vehicles, including motorcycles and mopeds.

Motorcycles are also subject to a lower rate of tax when using special type-approval plates on the vehicle. The basic rate of MVE is 6p per mile for cars (up to 3,000 miles per year), 8.5p for smaller vans (up to 3,000 miles per year) and motorcycles (up to 750 miles per year).

Cars registered in Scotland pay 6p per mile, while in Wales the rate is 8.5p. Motorcycles do not pay a minimal rate despite only being taxed as cars and vans; they pay tax the full standard rates up to what they would on a motorcycle. The MVE/DVLA temporary vehicle tax can be paid in cash, by cheque or by debit or credit card.

There is no need to apply for the tax, you can pay it at any Post Office branch and there are many of them across the country.

Duty at the airports and ports must also be paid in cash only. When making the payment, the DVLA asks for certain information about your vehicle; make sure that you have this on hand when you visit your local DVLA office.

Conclusion

If you own a company car and use it for business purposes, you may be subject to company car tax in the United Kingdom. This tax is based on the value of the vehicle and can range from 0% to 25%, with higher rates applying to larger vehicles.

You must also report any mileage using your company car, and pay associated taxes quarterly. If you have any questions about how company car tax works in the UK, please contact your accountant or financial advisor.