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HMRC internal manual

Employment Income Manual

Car benefit calculation Step 4, price cap for expensive cars (2002/03 to 2010/11 only)

Section 121(1) ITEPA 2003

Step 4

Before reading the guidance that follows this paragraph, ensure that you are familiar with the method statement in Section 121(1) ITEPA 2003, see EIM24015 (this page concerns step 4).

Years to 2010/11

The price of a car carried forward from step 3 of Section 121(1) is restricted to an upper limit of £80,000.

Because of its place in the calculation, it can be seen that this figure applies after the appropriate deduction of any capital contribution and is the same for all cars, classic or otherwise.

Years from 2011/12 onwards

From 2011/12, there is no restriction on the price of a car carried forward from Step 3. The full price of the car as determined under Steps 1 to 3 is therefore used to calculate car benefit and the figure carried forward from Step 3 becomes the “interim sum” for the purposes of Step 6.

Step 4 is omitted after 2010/11, so step 3 is followed by Step 5. Step 4 has been retained in the step-by-step guide at EIM24055 to avoid any confusion that might otherwise result.