In the UK it's a minefield :lol:
What is company car tax?
If you drive a car that has been provided by your employer, and you can use that vehicle for personal transport outside of work, then it's considered a company car and is seen as a taxable perk by HMRC. As a result, there is tax to pay.
Officially a company car is known as a Benefit In Kind (BIK), because there is a monetary value attached to your ability to use it privately. HMRC view it as an additional bonus on top of your annual salary, because the car is paid for by your employer in addition to your standard pay.
BIK (Benefit in Kind) rates are primarily based on a car's CO2 emissions, because the government has decided that the best way to help reduce the overall emissions of cars in the UK is to offer tax incentives to businesses that provide staff with company cars.
That's the basic foundation of BIK tax, but the amount you actually pay is determined by the list price of the car you're looking at, combined with the personal tax rate you're on (20%, 40% or 50%). The price of the car will be its list price before non-taxable items (first-year VED road tax, first registration fee, telephone installations, etc), but will also include the cost of any options.
In addition, the amount of tax you pay will be determined by the fuel you put in your car. In the past, pure electric vehicles (EVs) were exempt from taxation, but as their take-up has increased, HMRC has seen fit to include them on BIK rates, :evil: albeit at a substantially lower rate than conventional models. The low emissions of plug-in hybrid vehicles mean they're a popular interim solution while full-electric cars increase their range and rapid charging ability, as they can be driven like conventional cars, but have BIK rates that are far lower.
HMRC works out the amount of BIK tax you pay based on the amount of CO2 emissions a car emits. There are 21 emissions bands, starting with vehicles that emit 0-50g/km, ranging up to those models emitting 180g/km or more, and the amount of tax you pay is a percentage of the car's list price, which HMRC refers to as the P11D value. This is the price of the car with optional extras included, but minus the non-taxable parts of the vehicle, including the first year's VED (road tax) and its first registration fee. The P11D value is determined by the list price quoted by a manufacturer, so even if you get a discount on a new car's list price, the P11D value will remain unchanged.
As a Business owner, I find it much better and cheaper to just buy the car myself and then bill my company a rate per mile for every mile I use it, covering fuel costs and wear and tear for work.