How To Calculate Personal Use Of Company Car

Calculate Your Company Car Tax

Estimate the taxable benefit for the personal use of your company car based on its value, CO2 emissions, and fuel type.

Calculation Breakdown

Component	Value	Calculation/Notes
List Price/OMV	£30,000	Initial value
Capital Contribution	£0	Max £5,000 deduction
Adjusted Price	£30,000	Price – Contribution
CO2 Emissions	100 g/km	Used for BIK %
Fuel Type	Petrol	Affects BIK %
BIK Percentage	0%	Based on CO2 and Fuel
Base Car Benefit	£0	Adjusted Price * BIK %
Availability Adjustment	100%	(Days / 365)
Adjusted Car Benefit	£0	Base * Availability
Private Use Payments	£0	Deducted
Final Car Benefit	£0	Adjusted – Payments
Fuel Benefit Charge	£0	£27,800 * BIK % (if appl.)
Total Benefit	£0	Car Benefit + Fuel Benefit

What is Calculating Personal Use of Company Car?

Calculating the personal use of a company car involves determining the taxable benefit, also known as Benefit-in-Kind (BIK), that an employee receives from having a company car available for private journeys. HMRC (Her Majesty’s Revenue and Customs) in the UK views this as a non-cash benefit that is subject to income tax and National Insurance contributions for the employee, and Class 1A National Insurance for the employer.

The core idea is to assign a cash equivalent value to the benefit of having the car. This value is then added to the employee’s taxable income. The amount of tax paid depends on the employee’s income tax band.

Anyone who is provided with a company car by their employer that is also available for their private use needs to understand how to calculate personal use of company car. This includes journeys between home and work, unless it’s a “pool car” meeting strict criteria. Misunderstanding or incorrectly reporting this benefit can lead to underpayment of tax and potential penalties.

A common misconception is that if the employee contributes towards fuel, the car benefit is drastically reduced or eliminated. While contributions for private fuel can offset the separate fuel benefit charge, the main car benefit is based on the car’s value and emissions, and is reduced by payments made *specifically* for the private use of the car itself, not just fuel.

Company Car Tax Formula and Mathematical Explanation

The formula to calculate personal use of company car (the taxable benefit) is primarily based on:

1. The car’s list price (or Original Market Value – OMV), including accessories.
2. The car’s CO2 emissions and fuel type, which determine the Benefit-in-Kind (BIK) percentage.
3. Adjustments for capital contributions, availability, and payments for private use.
4. A separate calculation for fuel benefit if the employer pays for private fuel.

Step 1: Determine the BIK Percentage

The BIK percentage is found using HMRC’s tables, based on the car’s official CO2 emissions (g/km) and fuel type. Electric cars have low percentages, while cars with higher CO2 emissions have higher percentages (up to 37%). Diesel cars not meeting RDE2 standards have a surcharge. For hybrids with 1-50g/km CO2, the electric range also affects the BIK%.

Step 2: Calculate Initial Car Benefit

Initial Car Benefit = (List Price - Employee Capital Contribution) * BIK Percentage

The employee’s capital contribution is limited to £5,000 for this calculation.

Step 3: Adjust for Availability

If the car was not available for the full tax year:

Adjusted Car Benefit = Initial Car Benefit * (Days Available / 365)

Step 4: Deduct Payments for Private Use

Final Car Benefit = Adjusted Car Benefit - Employee Payments for Private Use

Step 5: Calculate Fuel Benefit (if applicable)

If the employer pays for all private fuel, a fixed charge (£27,800 for 2023/24) is multiplied by the same BIK percentage:

Fuel Benefit = Fuel Benefit Charge * BIK Percentage * (Days Available / 365)

(Reduced if fuel wasn’t provided for the full period of availability or if the employee fully reimburses private fuel costs).

Step 6: Total Taxable Benefit

Total Taxable Benefit = Final Car Benefit + Fuel Benefit

Variables Table

Variable	Meaning	Unit	Typical Range
List Price/OMV	The car’s price when new, including extras.	£	10,000 – 150,000+
CO2 Emissions	Official CO2 output of the car.	g/km	0 – 250+
Electric Range	Pure electric range for hybrids (1-50g/km).	Miles	0 – 100+
Fuel Type	Petrol, Diesel (RDE2/Non-RDE2), Electric, Hybrid.	N/A	–
BIK Percentage	Percentage applied to car’s value based on CO2 and fuel.	%	2% – 37%
Days Available	Number of days the car was available for use.	Days	1 – 365
Capital Contribution	Employee’s payment towards car purchase (max £5k).	£	0 – 5,000
Private Use Payment	Employee’s annual payment for private car use.	£	0 – Several thousands
Fuel Benefit Charge	Fixed amount set by HMRC for fuel benefit calc.	£	£27,800 (2023/24)

Understanding how to calculate personal use of company car is vital for tax planning.

Practical Examples

Let’s look at how to calculate personal use of company car with two examples for the 2023/24 tax year:

Example 1: Petrol Car

• List Price: £35,000
• CO2 Emissions: 120 g/km
• Fuel Type: Petrol
• Days Available: 365
• Capital Contribution: £1,000
• Private Use Payments: £600 per year
• Private Fuel Paid by Employer: No

BIK Percentage for 120g/km Petrol: 29%

Adjusted Price: £35,000 – £1,000 = £34,000

Initial Car Benefit: £34,000 * 0.29 = £9,860

Adjusted for Availability: £9,860 (365/365)

Final Car Benefit: £9,860 – £600 = £9,260

Fuel Benefit: £0 (as employer doesn’t pay for private fuel)

Total Taxable Benefit: £9,260. An employee paying 20% tax would owe £1,852, and 40% tax £3,704.

Example 2: Electric Car with Fuel Benefit

• List Price: £50,000
• CO2 Emissions: 0 g/km
• Fuel Type: Electric
• Days Available: 365
• Capital Contribution: £0
• Private Use Payments: £0
• Private Fuel (Electricity) Paid by Employer: Yes (e.g., home charging paid)

BIK Percentage for 0g/km Electric: 2%

Adjusted Price: £50,000

Initial Car Benefit: £50,000 * 0.02 = £1,000

Final Car Benefit: £1,000

Fuel Benefit: £27,800 * 0.02 = £556 (Note: Fuel benefit for electric cars applies if electricity for private use is paid by employer)

Total Taxable Benefit: £1,000 + £556 = £1,556. At 20% tax, this is £311.20.

How to Use This Company Car Personal Use Calculator

1. Enter Car’s Value: Input the list price or Original Market Value (OMV) of the car when new, including factory-fitted options and VAT, but before any discounts.
2. Input CO2 Emissions: Find the official CO2 emissions figure for the car model (in g/km). Enter 0 for fully electric cars.
3. Select Fuel Type: Choose the car’s fuel type from the dropdown. Be specific about diesel (RDE2 compliant or not) and hybrids.
4. Enter Electric Range (Hybrids): If you selected a hybrid with 1-50g/km CO2, enter its official pure electric range in miles. Otherwise, enter 0.
5. Days Available: Enter the number of days the car was available to you during the tax year (6 April to 5 April).
6. Capital Contribution: If you paid towards the car’s purchase price or accessories (up to £5,000), enter the amount.
7. Private Use Payments: Enter the total amount you pay your employer annually specifically for the private use of the car (not running costs like fuel you pay for).
8. Private Fuel: Indicate if your employer pays for fuel (or electricity) used for your private journeys.
9. Calculate: The calculator will automatically update the results, showing the BIK percentage, car benefit, fuel benefit (if applicable), and the total taxable benefit.
10. Review Results: The primary result is the Total Taxable Benefit, which is the amount added to your income for tax purposes. The intermediate values show how this is derived. The table and chart give more detail.

The total taxable benefit figure is what you’d multiply by your income tax rate (e.g., 20%, 40%, 45%) to find out how much tax you’ll pay annually for the company car.

Key Factors That Affect Company Car Tax Results

1. Car’s List Price (OMV): Higher-priced cars generally result in a higher taxable benefit, as the BIK percentage is applied to this value.
2. CO2 Emissions: This is a major factor. Lower CO2 emissions lead to a lower BIK percentage and thus lower tax. Electric and low-emission hybrid cars are taxed much less.
3. Fuel Type: Diesel cars not meeting RDE2 standards attract a higher BIK percentage than petrol or RDE2 diesel cars with the same CO2. Electric cars have the lowest rates.
4. Availability of the Car: If the car is only available for part of the tax year, the taxable benefit is proportionately reduced.
5. Employee Capital Contributions: Payments by the employee towards the car’s purchase price (up to £5,000) reduce the value on which the BIK percentage is applied.
6. Payments for Private Use: Money paid by the employee to the employer specifically for private use directly reduces the car benefit value.
7. Provision of Free Private Fuel: If the employer pays for fuel for private journeys, a separate fuel benefit charge is added, increasing the total taxable amount significantly.
8. Employee’s Income Tax Rate: The final amount of tax paid depends on whether the employee is a basic (20%), higher (40%), or additional rate (45%) taxpayer. The taxable benefit is added to their income.

Carefully considering these factors when choosing a company car can help manage the amount of tax you need to pay. The way you calculate personal use of company car tax is directly impacted by these elements.

Frequently Asked Questions (FAQ)

1. What is considered “personal use” of a company car?

Personal use generally includes any driving that is not solely for business purposes. This includes commuting between home and your permanent workplace, shopping trips, holidays, and driving family members around.

2. How is the BIK percentage determined?

The BIK percentage is set by HMRC based on the car’s CO2 emissions and fuel type. There’s a sliding scale, with lower percentages for lower emissions. For hybrids (1-50g/km), the pure electric range also influences the percentage. You can find the tables on the HMRC website.

3. What if the car is electric?

Electric cars have very low BIK percentages (e.g., 2% for 2023/24), making them very tax-efficient as company cars. The way you calculate personal use of company car benefit is the same, but the percentage is much lower.

4. Does paying for my own fuel reduce the car benefit?

Paying for your own fuel for private journeys means you avoid the separate *fuel benefit charge*. It does not reduce the *car benefit* itself, which is based on the car’s value and CO2. Only payments made specifically for the *use* of the car reduce the car benefit.

5. What if I make a contribution towards the car’s cost?

A capital contribution made by you towards the purchase price or accessories (up to £5,000) reduces the list price used to calculate the car benefit, thus lowering your tax.

6. What happens if the car is only available for part of the year?

The car benefit and fuel benefit (if applicable) are reduced proportionally based on the number of days the car was available to you during the tax year.

7. Is there a fuel benefit for electric cars?

Yes, if the employer pays for the electricity used for private mileage (e.g., pays for your home charging costs for private use), a fuel benefit charge applies, although it’s calculated using the low BIK rate for electric cars.

8. Where do I find the CO2 emissions and list price for my car?

The CO2 emissions are usually on the car’s V5C registration document. The list price is the price when new, including VAT and delivery, plus any accessories fitted before delivery. Your employer or fleet provider should have this information.

Related Tools and Internal Resources

Using our calculator helps you accurately calculate personal use of company car tax liability.