Adept Vehicle Management take a close look at company car Benefit In Kind.

• What is company car tax?

Answer: A tax which is payable on a certain percentage of the total P11d value of your car. The percentage is determined based on the emissions of the car. People earning £35,000 per year or less will have to pay 20% of this amount in tax, and people earning over that amount will have to pay 40%. If you're lucky enough to earn over £150,000 each year you'll have to pay 50%. This is normally deducted each month from your salary. Q: Are there any dispensations for low-emissions cars that aren't 100% electric? A: A 5% BIK band is now in place for cars that emit below 75g/km CO2.

•  Is there a maximum price cap on the amount taxable on a company car?

Answer: No, after April 1 2011 the £80,000 cap no longer exists.

• Why are diesels so popular?

Answer: The simple answer is they produce less CO2, so the tax bill should be smaller. However, they are usually significantly more expensive to buy than an equivalent petrol version, so you have to make sure the higher P11D price doesn't outweigh any advantage from a lower tax band. You also need to do your homework on fuel costs, because diesel costs more at the pumps than petrol and you need to meet the predicted fuel economy figures from the manufacturer to gain a real benefit.

• Will electric cars be exempt from company car tax?

Answer: Yes. Following an announcement made by Alistair Darling last year in the pre-budget report, electric cars will be exempt from company car tax for five years, beginning in April 2010.

• What about hybrid cars? Where do they come into it?

Answer: Hybrid cars currently conform to the same tax rules as petrol cars. This means they sit in lower bands, so you'll pay less tax for owning them.

• What about the rules for vans?

Answer: Light commercial vehicles, including double-cab pick-up trucks with payloads in excess of 1000kg, are classed as a benefit in kind if they are also provided for private use. Unlike cars, tax on use of commercial vehicles provided by an employer is levied at a flat rate. Currently this is £3000 if the van is less than four years old at the end of the tax year. Therefore a basic rate taxpayer would owe the treasury £600 a year, while a higher rate taxpayer would have an annual bill of £1200. If fuel is also provided by the employer for private use, the tax payable on this is £700 for a 20% taxpayer, and £1400 for a 40% taxpayer.

• So how much should I expect to pay in company car tax? A: You can use our company car tax calculator below. The table below outlines the tax payable on company cars over the next few years, arranged with by a car's emissions output:

Familiar Company Car Terms

Additional rate - this is a tax rate for people earning over £150,000 each year, and is payable at 50%.

Basic rate - for 2011/2012 employees earning under £35,000 a year, a lower rate of tax is payable. With regards to company car tax, they are eligible for a 20% tax rate.

Benefit in kind (BIK) - this is any benefit which employees receive from employment but are not included in a salary. The obvious example in our case is company cars, which are taxed according to the income of the employee.

Emissions - the amount of gas the car emits from the exhaust. Measured in terms of CO2 for company car tax purposes.
g/km - the level of carbon dioxide emitted by a car is measure in grams per kilometre.

Higher rate - for 2011/2012 an employee earning between £35,001 and £150,000, a higher rate of tax is payable. With regards to company car tax, this means paying 40% tax.

P11d - this is the form that each employer must fill in annually and send to the tax office.

P11d value - this is the value of your car including RRP, VAT, delivery and any extras (such as metallic paint or satellite navigation). It does not include road tax or first registration fee.

Personal tax allowance - this is a sum of money that you're allowed to earn without being taxed upon it. For 2011/2012 this amount was £7,475.

Recommended retail price (RRP) - this is the amount the car manufacturer thinks its car is worth. It's likely that some RRPs will be very different from the actual price the customer pays for the car thanks to heavy discounting, so be aware that you may end up paying far higher tax on your car than you thought.