Company car drivers on the rise

New benefit in kind figures released by HMRC show that the number of recipients of company car benefit rose by 40,000 year-on-year in 2022/23.

Rising to 760,000 compared to 720,000 in the 2021/22 tax year, the number of employees paying company car tax showed a 5.5% improvement and the first increase since 2015.

Number of recipients and total taxable value of company cars

Source: HMRC Benefit in kind statistics commentary June 2024

Recent growth could be partly attributed to the rise in salary sacrifice schemes for cars.

The new HMRC report also highlighted that the number of recipients of company car benefit could be even higher due to under-reporting after voluntary payrolling was introduced in April 2016: “there is internal evidence to suggest that a substantial number of company car benefits were not correctly reported to HMRC in recent tax years, which suggests that the 760,000 figure underestimates the true number of company car recipients”.

The number of company car drivers had been in steady decline from 960,000 in 2015 to 2016.

The total taxable value of company car benefit was £3.60 billion in tax year 2022/23 down from £3.95 billion in 2021/22.

Total income tax and NIC liabilities arising from company car benefit were around £1.21 billion and £0.52 billion respectively.

Over the period from 2011/12 to 2019/20 the total taxable value of company car benefit increased from £3.61bn to £5.43bn, but fell to £4.62bn in 2020/21, £3.95bn in 2021/22 and £3.6bn in 2022/23.

HMRC noted that the increase to 2019/20 was primarily due to increases in the ‘appropriate percentages’ used to calculate the taxable value of a company car, and to a lesser extent increases in the average car list price. These offset the falling number of company car drivers.

By contrast, in 2020/21 the total taxable value decreased. This was driven by a reduction in the number of company cars and a shift towards electric powered cars which are subject to lower BiK tax rates. The shift to electric powered cars has continued through to 2022/23.

The report also found that the drop in the number of company car drivers in 2020/21 is expected to have been exacerbated somewhat by the impacts of the COVID-19 pandemic, and associated reduction in economic activity, with changes in work practices during that period continuing into 2021/22.

HMRC noted that, “The increase in company car drivers in 2022 to 2023 may indicate a slight return to more normal activity.”