Company car benefit (UK income tax)
Where an employer makes a car available for an employee’s private use, a taxable car benefit generally arises. Its full-year cash equivalent is based on the car’s taxable list price and accessories multiplied by the appropriate percentage, determined by factors including CO2 emissions, fuel type and, for qualifying hybrids, electric range. Availability, employee contributions and statutory adjustments can change the amount. For 2025–26 the appropriate percentage for a zero-emission car is 3%.
Worked example
An employer provides a zero-emission car throughout 2025–26. Its taxable list price including relevant accessories is £40,000, and assume no contributions or other adjustments. The benefit is £40,000 × 3% = £1,200. This is taxable benefit, not tax payable.
Common mistake
Applying the percentage to the employer’s discounted purchase price instead of the relevant list price, or confusing the cash equivalent with tax due.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | TX (UK) | Supporting | June 2026–June 2027 |