Payroll Hub · Simple employer guide
A simple guide to calculating company-car tax
See the basic calculation and the car or employee details that can change the answer.
Best for: Business owners and people working in payroll, finance or HR
- Plain-English guide
- Reviewed 11 August 2026
In simple terms
Status: HMRC interim guidanceFor 2027/28, the basic calculation is the car’s relevant price multiplied by its company-car percentage. The percentage depends mainly on emissions, fuel type and, for some cars, electric range. Employee payments and the time the car was available can reduce the final taxable value.
What is the relevant vehicle price?
It is usually based on the car’s official list price when new, plus relevant accessories. It is not necessarily the price the employer paid. A qualifying contribution from the employee may reduce it within HMRC’s limits.
How is the appropriate percentage chosen?
Use the percentage for the correct tax year and vehicle. It is based on details such as CO₂ emissions, fuel type and, for some low-emission cars, electric range.
Illustrative company-car calculation
A fictional car has a relevant price of £40,000 and an applicable percentage of 24%. There are no employee private-use payments in this simplified example.
£40,000 × 24% = £9,600
Result: £9,600 annual taxable benefit before adjusting for the time the car was available
Optional detail
Official guidance behind this answer
The short answers above are enough to get started. Open these sections only if you need to check the current HMRC position or source.
What Benefits in Kind must be payrolled from 6 April 2027?
Status: HMRC interim guidanceFrom 6 April 2027, HMRC says employers will need to put company cars, car fuel, vans, van fuel and employer-provided medical benefits through payroll.
Read the full answer and official source
These are the first five benefit groups in the change. HMRC currently plans to add most other Benefits in Kind from April 2028, while loans and accommodation will continue to have separate arrangements.
Source: HM Revenue and Customs — The phased introduction of mandatory payrolling for benefits in kind
Source updated: . Workmax reviewed: .
Plain-English Benefits in Kind glossary
- Benefit in Kind (BiK)
- A non-cash benefit or expense provided by an employer that may create an Income Tax liability.
- Payrolling benefits
- Including a benefit's taxable value in payroll so Income Tax is collected through PAYE.
- Cash equivalent
- The statutory taxable value of a benefit, which may differ from its purchase price or cash cost.
- Class 1A NIC
- An employer National Insurance liability charged on many taxable benefits and expenses.
- P11D
- The end-of-year form traditionally used to report taxable expenses and benefits for an employee.
- FPS
- The Full Payment Submission employers send through Real Time Information when payroll is reported to HMRC.
