How is the taxable benefit calculated on company cars?

A company car is a car made available by the employer for the private use of an employee. Private use includes ordinary home to work and back commuting journeys.

You have to pay tax on any benefit in kind you receive, including a company car, if you earn more than £8,500 a year.

Employees have to pay tax on the 'car benefit', which for tax purposes is a maximum of 35% and a minimum of 15% of the 'price' of the car (depending on its carbon dioxide emissions) up to a maximum of £80,000.

A further separate charge is made if the employee is provided with fuel for private use.

The price of the car will usually be the total of:

• the UK list price
• VAT
• delivery charges
• cost of accessories fitted before the car is made available
• cost, in excess of £100, of accessories fitted after the car is made available
• less any capital contribution by the employee up to £5,000.

The HM Revenue & Customs website has useful information on company cars.