The calculation has three steps and none of them care what the car is worth second hand.

Step 1: the price of the car

The starting point is the list price when the car was new, including accessories and delivery, not what you or your company actually paid. Buying a three-year-old £40,000 car for £22,000 does not help: the taxman still works from £40,000. If you chip in towards the cost yourself, your contribution comes off, capped at £5,000.

Step 2: the percentage

CO2 emissions set the percentage, from the table in HMRC’s Appendix 2 for 2026/27:

• Zero emission: 4%
• Plug-in hybrids (1 to 50g/km): 4% to 16%, depending on how far they drive on electric power
• 51g/km and up: starting at 17% and climbing 1% per 5g, to a maximum of 37% at 155g/km and above

Diesels that do not meet the RDE2 standard pay a 4% supplement, still capped at 37%.

Step 3: tax on the benefit

List price x percentage = the taxable benefit. You pay Income Tax on it at your marginal rate, collected through your tax code. Your employer pays 15% Class 1A National Insurance on the same value after the year end.

Worked example

£40,000 list price, 120g/km, so 30%. Benefit: £12,000.

• Basic rate taxpayer: £12,000 at 20% = £2,400 a year, £200 a month
• Higher rate taxpayer: £12,000 at 40% = £4,800 a year, £400 a month
• Employer Class 1A: £12,000 at 15% = £1,800

Only have the car for part of the year and the benefit is divided by the months you had it. Pay the company something for private use and that comes off too.

Fuel is a separate benefit

If the company pays for your private fuel, that is taxed as its own benefit, and it is expensive for what it is. Most drivers are better off paying for their own fuel and claiming business mileage at the approved rates.

HMRC has an online calculator for company car and fuel benefit if you want to check a specific car.

Sources

All pages checked 20 October 2026.

• Company car benefit appropriate percentages (480: Appendix 2): https://www.gov.uk/guidance/company-car-benefit-the-appropriate-percentage-480-appendix-2
• Tax on company cars: https://www.gov.uk/tax-company-benefits/tax-on-company-cars
• How to work out the benefit of a company car (480: Chapter 12): https://www.gov.uk/guidance/how-to-work-out-the-benefit-of-a-company-car-480-chapter-12
• Rates and thresholds for employers 2026 to 2027: https://www.gov.uk/guidance/rates-and-thresholds-for-employers-2026-to-2027

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