📅 2026 Update: Changes in Company Car Tax Regulations

Since the original article was published, several important changes have occurred in tax regulations related to company cars. These changes may impact how you understand and manage the taxes associated with a company vehicle. The earlier article continues further down the page and provides foundational information.

🗺️ New Pass-Through Entity Taxes

Many states have introduced new Pass-Through Entity Taxes (PTETs) since 2024. These taxes are similar to Illinois' entity-level tax and affect how business owners report income from pass-through entities. States like Hawaii, Iowa, and Indiana have enacted these laws, which could influence tax obligations for companies providing vehicles to employees.

📝 Important Tax Forms

Several IRS forms remain crucial for managing tax matters related to company cars. For instance, Form 3911 is used to trace unreceived refunds. If companies have not received tax refunds associated with vehicle expenses, they can submit this form. Form 1065 is essential for partnerships reporting income and deductions, which may include vehicle-related expenses.

⏰ Updated Processing Times

Processing times for various IRS forms are subject to change. For instance, Form 3911, Form 8716, and Form 1065 may have different processing times based on the IRS center handling them. It's advisable to check the IRS website for the most current processing times.

🆓 Free Tax Assistance

Taxpayers can access free assistance programs. The IRS Free File program provides free tax preparation for eligible individuals. Additionally, Volunteer Income Tax Assistance (VITA) helps those who need help preparing their own tax returns.

These resources can be valuable for individuals managing company car taxes.

📌 Key Points to Remember

  • 🗺️ New PTETs have been introduced in multiple states.
  • 📝 Key IRS forms, such as Form 1065, are vital for reporting vehicle-related expenses.
  • ⏰ Processing times for forms may vary; check the IRS website for updates.
  • 🆓 Free assistance options are available through VITA and the IRS Free File program.

💡 Tips for Managing Company Car Taxes

Review the details of your specific situation with your attorney.

📑 Keep Records of Expenses

Document all expenses related to the company car. This includes gas, maintenance, insurance, and any other costs. Keeping thorough records will help when filing taxes.

📊 Understand Pass-Through Entity Taxes

If your business operates as a pass-through entity, familiarize yourself with the new PTETs in your state. These taxes may affect your overall tax liability and how you report income.

💻 Utilize IRS Resources

Make use of the IRS resources available for taxpayers. The IRS Free File program can help you file your taxes for free if you qualify, making it easier to manage your company car tax situation.

📅 Stay Updated on Deadlines

Be aware of deadlines for submitting tax forms. For instance, Form 1065 is generally due on the 15th day of the third month after the end of your partnership's tax year.

📞 Seek Free Assistance When Needed

Consider reaching out to the VITA program if you need help preparing your taxes. This can provide valuable support, especially if you’re unsure about how to report vehicle-related expenses accurately.

🔍 Review State Tax Resources

Check your state’s official tax website for detailed information on state tax rates and deductions. Each state may have specific rules regarding company cars that could impact your tax filings.

🏆 Top Services for Tax Preparation Ranked by User Reviews (2026)

This section covers various tax services relevant to company car tax management. These services have been rated based on user reviews and their ability to assist with tax preparation. The ratings come from Trustpilot data checked in October 2026, and scores can change over time.

Remember, star ratings are just one aspect, as unhappy customers tend to leave more reviews.

🥇 1. SMAART Tax

SMAART Tax has been rated 4.4. It is known for providing virtual tax services that cater to clients across all 50 states. Users appreciate the convenience of online services, but some note that in-person consultations are limited.

🥈 2. KBO Tax & Accounting Services

KBO Tax & Accounting Services holds a rating of 4.5. This company is recognized for its nationwide tax preparation and bookkeeping services. While many users find their services helpful, some have mentioned a lack of in-person office locations.

🥉 3. Jackson Hewitt Tax Service

Jackson Hewitt Tax Service has a 4.2 rating. It is known for its comprehensive tax preparation services available at locations nationwide. However, some reviewers have raised concerns about customer service responsiveness.

4️⃣ Libre Tax Service

Libre Tax Service maintains a rating of 4.1. It offers online tax preparation services and IRS audit defense. Some users experience challenges navigating the website, which may impact their overall experience.

5️⃣ TaxSlayer

TaxSlayer averages a 4.0 rating. This service is recognized for its affordable online tax preparation software. Users report occasional software glitches, which could complicate the filing process.

6️⃣ Advanta Tax

Advanta Tax has a score of 4.3. It provides nationwide tax services, including IRS resolution and state tax debt assistance. Some clients have reported delays in service, which could affect timely tax filings.

🆓 Free Tax Assistance Programs

Free tax assistance is available through programs like IRS Free File and VITA. These programs provide valuable support for individuals who may need help preparing their taxes, especially concerning vehicle-related expenses.

🔎 What to Compare When Choosing a Tax Service

  • 🏆 Check Trustpilot ratings for overall customer satisfaction.
  • 🔍 Assess the types of services offered, including online and in-person options.
  • 💵 Look for pricing structures to understand potential costs.
  • 📅 Review processing times for different forms and services.
  • 📞 Consider customer service quality based on user reviews.

❓ Frequently Asked Questions

❓ What is a Pass-Through Entity Tax?

A Pass-Through Entity Tax (PTET) is a tax that certain states have implemented for pass-through entities, similar to Illinois' entity-level tax. This tax impacts how business owners report their income.

📅 When are taxes due for Form 1065?

Form 1065 is generally due on the 15th day of the third month after the end of the partnership's tax year. It's essential to mark this deadline to avoid penalties.

📝 How can I trace an unreceived tax refund?

To trace a tax refund that has not been received, you can complete Form 3911, which is the Taxpayer Statement Regarding Refund. This form can help you request a trace from the IRS.

🏢 What resources are available for free tax help?

Free tax help can be accessed through programs like VITA and IRS Free File. These programs assist eligible individuals in preparing their tax returns at no cost.

📊 How do I stay informed about tax law changes?

Staying informed about tax law changes can be achieved by regularly checking the IRS website and subscribing to their newsletters. This ensures you are updated on any new laws that may affect your tax situation.

🚪 Where can I find in-person tax assistance?

In-person tax assistance can be found at local IRS offices or through Taxpayer Assistance Centers. These locations offer support for various tax-related questions and issues.

⚖️ Recent Cases Related to Company Car Tax Issues

Recent court rulings have focused on various aspects of tax regulations related to company vehicles and their use. These rulings may influence how taxes are assessed or reported for company cars.

Readers can browse more rulings on the news page for recent updates on legal cases affecting company car tax matters.

End of October 2026 Update






Paying A Company Car Tax: Everything You Need to Know
With company cars becoming increasingly popular, it is important to know the ins and outs of paying company car tax. Company car tax is a tax paid by employees who use a company car for personal use and is based on a number of factors, such as the car’s CO2 emissions and its price. In this article, we will go over everything you need to know about paying company car tax, including how it is calculated, the different tax rates, and how you can reduce your tax liability.

What is Company Car Tax?

Company car tax, also known as Benefit In Kind (BIK) tax, is a tax that employees pay when they use a company car for personal use. The tax is paid by the employee, not the employer, and is calculated based on a number of factors, such as the car’s CO2 emissions, its list price, and the employee’s tax bracket.

Paying A Company Car Tax

How is Company Car Tax Calculated?

Company car tax is calculated using a number of factors. These include:

- The car’s list price

- The car’s CO2 emissions
- The fuel type of the car
- The employee’s tax bracket

The list price of the car is used to determine the car’s P11D value. This is the car’s value when it is new, including all accessories and options. The P11D value is then used to calculate the BIK tax.

The car’s CO2 emissions also play a role in the calculation of BIK tax. The higher the CO2 emissions, the higher the BIK tax. This is because cars with higher CO2 emissions are considered to be less environmentally friendly.

The fuel type of the car also affects the BIK tax. Cars that run on diesel are subject to a higher tax rate than petrol cars. This is because diesel cars tend to have higher CO2 emissions.

Finally, the employee’s tax bracket is taken into consideration. The higher the employee’s tax bracket, the higher the BIK tax. This is because the employee is paying tax on the benefit they receive from using the company car.

What are the Different Tax Rates for Company Car Tax?

The tax rate for BIK tax depends on a number of factors, including the car’s CO2 emissions, its list price, and the employee’s tax bracket. The table below shows the different tax rates for BIK tax in the current tax year (2020-2021):

CO2 emissions (g/km) Electric range for hybrid vehicles (miles) Official CO2 emissions (g/km) 2019/2020 BIK rate (%) 2020/2021 BIK rate (%) 2021/2022 BIK rate (%)
0+ >130 16 0% 0% 1%
1-50 >130 16 16% 14% 13%
1-50 70-129 16-50 16% 14% 13%
1-50 40-69 51-75 16% 14% 13%
1-50 130 19% 16% 15%
51-54 70-129 51-75 19% 16% 15%
51-54 75 20% 17% 16%
55-59 >130 19% 16% 15%
55-59 70-129 51-75 19% 16% 15%
55-59 75 21% 18% 17%
60-64 >130 19% 16% 15%
60-64 70-129 51-75 19% 16% 15%
60-64 75 22% 19% 18%
65-69 >130 19% 16% 15%
65-69 70-129 51-75 19% 16% 15%
65-69 75 23% 20% 19%
70-74 >130 19% 16% 15%
70-74 70-129 51-75 19% 16% 15%
70-74 75 24% 21% 20%
75-79 >130 19% 16% 15%
75-79 70-129 51-75 19% 16% 15%
75-79 75 25% 22% 21%
80+ >130 19% 16% 15%
80+ 70-129 51-75 19% 16% 15%
80+ 75 26% 23% 22%

As you can see, the tax rate for BIK tax varies depending on the car’s CO2 emissions and list price. Electric cars and hybrids with low CO2 emissions are currently not subject to BIK tax at all. However, from April 2021, electric cars will incur a 1% BIK tax rate.

How Can You Reduce Your Company Car Tax Liability?

There are a number of ways to reduce your company car tax liability. These include:

- Choosing a car with low CO2 emissions

- Opting for a hybrid or electric car
- Choosing a car with a lower list price
- Using the car only for business purposes

Choosing a car with low CO2 emissions is one of the most effective ways to reduce your BIK tax liability. This is because cars with low CO2 emissions are subject to a lower tax rate. Opting for a hybrid or electric car can also reduce your tax liability, as these cars are often exempt from BIK tax completely.

Choosing a car with a lower list price can also reduce your tax liability. This is because the list price is used to calculate the car’s P11D value, which is then used to calculate the BIK tax. Finally, using the car only for business purposes can reduce your tax liability, as there is no BIK tax to pay on a company car that is used exclusively for business purposes.

Conclusion

Company car tax can be a complex topic, but it is important to know the ins and outs if you use a company car for personal use. The tax is calculated based on a number of factors, including the car’s CO2 emissions, its list price, the fuel type, and the employee’s tax bracket. There are a number of ways to reduce your tax liability, such as choosing a car with low CO2 emissions, opting for a hybrid or electric car, choosing a car with a lower list price, and using the car only for business purposes. By understanding the rules and regulations of BIK tax, you can ensure that you are not paying more tax than you need to.

When paying a company car tax in the United Kingdom, a company can use all of the same resources to pay a car tax online that are available to individuals. The ability to pay a company car tax online is provided through a website operated by The Driver and Vehicle Licensing Agency.

The Driver and Vehicle Licensing Agency website allows individuals and companies to apply for a new tax disc to prove that the latest Vehicle Excise Duty that has been assessed for the car has been paid.

Since The Driver and Vehicle Licensing Agency made it possible to pay the company car tax online, The Driver and Vehicle Licensing Agency had to adjust the regulations regarding tax discs. Previously, a vehicle with a tax disc that had expired the previous day would subject the disc holder to having to pay a fine immediately.

However, once it became possible to pay the company car tax, or for that matter any car tax online, the regulations were rewritten to allow five business days after the expiration of the previous tax disc to allow the new disc to travel through the first class post system.