How much company car tax is depends on four things, and the monthly figure on the quote is not one of them: the car's P11D value, its CO2 band and fuel type, the driver's marginal tax rate, and how much of the year the car is available. The arithmetic is HMRC's: P11D value times the appropriate percentage for the band gives the cash equivalent, and the driver pays income tax on that at their rate through their tax code. This page works one car all the way through, from list price to the monthly deduction, then shows how each of the four inputs moves the answer, with the company car tax calculator on this site doing the same on your own car.
The worked example
A car with a P11D value of £34,000 in the 120 to 124 g/km band carries an appropriate percentage of 30 percent for 2026 to 2027, so its cash equivalent is £34,000 times 30 percent, £10,200 a year. A higher-rate driver pays income tax on that at HMRC's higher rate of 40 percent, £4,080 a year, which is £340 a month through the tax code. A basic-rate driver on the same car pays half that. The employer pays Class 1A on the same £10,200 at 15 percent, £1,530, in July.
The band moves it most
Swap the same £34,000 of list price into a fully electric car at 4 percent and the cash equivalent falls to £1,360, the higher-rate driver's tax to £544 a year, about £45 a month. Move it up to a 160 g/km diesel at the 37 percent cap and the cash equivalent is £12,580, the tax £5,032 a year. The percentage table runs from 4 percent to 37 percent and the band decides more than the price does.
The rate, the months and the contributions
The driver's rate is the marginal rate the benefit lands in once it sits on top of salary, often the higher rate for a driver whose salary alone would not reach it. A car available for six months carries half the year's figure. A capital contribution of up to £5,000 comes off the P11D value before the percentage; private-use payments come off the cash equivalent after. Private fuel paid by the employer adds a separate fuel benefit on top.
Where the figure lands
The employer reports the cash equivalent on the P11D by 6 July, HMRC adjusts the driver's tax code so the tax is collected monthly through payroll, and the employer pays the Class 1A by 22 July. A driver who wants the number before accepting the car runs the calculator on this site with the P11D value from the quote and the CO2 figure from the specification.
Questions people ask about how much is company car tax
Is company car tax paid monthly or yearly?
It is collected monthly, through an adjustment to the driver's tax code, so it reduces net pay each month across the year.
Does the tax depend on what the company paid for the car?
No. It depends on the list price when first registered, with factory-fitted options, whatever the discount or the lease cost.
How much is company car tax on an electric car?
At 4 percent of the P11D value for 2026 to 2027, a fraction of a petrol or diesel car's: a higher-rate driver pays about £45 a month on a £34,000 electric car.