P11D and the associated ‘P11D values’ mean very little to most people when you see this odd little title written down. If you’re a company car user, however, you will probably have heard the terms being tossed about a fair bit. If you’re at all unsure about what a P11D or P11D value is, fear not because Auto Express is here to explain all.
The P11D is, rather boringly, a form. Its purpose is to prevent employers and employees from circumventing the UK tax system via benefits in kind — like company cars. Any employer which provides expenses or benefits to employees is required to fill out a P11D (one per employee). The form provides HMRC with the details of any benefits so that the tax and national insurance owed can be calculated.
Even though the employer will be the one submitting the P11D form, the employee will be the one ultimately on the receiving end of the tax bill. That’s where the importance of the P11D to company car users comes in. To keep your tax bill as low as possible, company car drivers will need to choose a car with an low P11D value and a low company car tax band.
P11D value is not an official term but it is used colloquially to mean the value of a company car in the eyes of HMRC. The P11D value is the list price of a car including VAT and any delivery charges but it does not include the first registration fee or road tax. Any factory options fitted to the car will be included in the list price and, therefore, the P11D value.
Once you have the company car’s P11D value, you can work out your annual company car tax by multiplying it by the percentage rate of your income tax bracket (either 20 per cent or 40 per cent ) and the car’s benefit-in-kind tax band, which is based on its CO2 emissions on models registered since 1 January 1998.
P11D of used and classic cars
The same P11D value calculation applies to both new and used cars so if you were considering running a used company car, the P11D value and the tax you incur will still be based on the list price when it was new. If there is no list price available to reference, a notional price is used. This is a reasonable value that the manufacturer, importer or distributor would have been expected to have sold the car for.
For the purposes of the P11D, the government defines a classic car as one that is 15 years old or older at the end of the current tax year, and has a market value greater than its original list price. Company car tax is then calculated via three tax bands based on engine size.
■ 0 to 1,400cc – 15%
■ 1,401 to 2,000cc – 22%
■ Over 2,000cc – 32%
If the car’s market value is over £15,000 the percentage is applied to that figure. If the market value is under £15,000 the percentage is applied to the list price of the car when it was new.