A company car purchase starts a benefit in kind on the day the car becomes available to a driver for private use, and the tax on it is worked from the car's list price and CO2 band rather than from the price the company paid. That single fact decides most of what follows: a discount does not reduce the tax, a second-hand purchase is taxed on the original list price, and a car bought in March creates a P11D entry for that tax year. This page is written for the employer or director completing the purchase: what to take from the invoice and the V5C, how the benefit runs from the delivery date, what the driver and the company pay, and what to record, with the calculator on this site working the figures.
From the invoice and the V5C
The P11D value is the manufacturer's list price when the car was first registered, including VAT, delivery and factory-fitted options; the invoice shows what was paid, which is not it. The CO2 figure, the fuel type and, for a plug-in hybrid, the electric range come from the V5C or the certificate of conformity, and for a diesel the RDE2 status decides whether the 4 point supplement applies.
From the day it is available
The benefit runs from the first day the car is available to the driver for private use, not from the purchase date or the registration date, and the cash equivalent is reduced for any period of thirty or more consecutive days when it is unavailable. A car delivered on 20 March is a benefit for the remaining days of that tax year, on that year's P11D, at that year's percentage.
What the driver and the company pay
The driver pays income tax on the cash equivalent at their marginal rate through their tax code; the company pays Class 1A at 15 percent on the same figure by 22 July after the tax year. Neither depends on the purchase price, the finance or whether the car was new. The company's own tax treatment of the purchase is a separate matter for the accountant.
The record
P11D value, CO2 and range, fuel type and RDE2 status, the date available, any capital contribution by the driver up to the £5,000 cap, any private-use payments, the driver and their rate. Add the car on the day it arrives, because the P11D is worked from those fields and a car added in June for a March delivery is the one that gets missed.
Questions people ask about company car purchase
Does a discount on the purchase reduce company car tax?
No. The tax is worked from the list price when first registered, not from what was paid.
Is a second-hand company car taxed on its second-hand price?
No. It is taxed on the original list price when first registered, with the percentage for its CO2 band, however old it is, unless it is a classic car under HMRC's separate rule.
Does Carbikly record the purchase?
Carbikly Pro keeps the car from the day it arrives with the fields the P11D needs, and works the benefit and the Class 1A for it each April.