How to Remove a Company Car or Other Benefit from Your Tax Code (2026/27)

Why a returned company car stays in your tax code, how to remove it through HMRC's online services, and when the new code and refund reach your pay.

2026/27 tax year

Employment & Career
Employee
UK-wide

Summary

HMRC's PAYE Manual says benefit figures from last year's P11D are automatically coded for the current year and the next, and car benefit is carried forward at annual coding. A car you handed back in May can therefore sit in your 2026/27 code until someone tells HMRC it has gone.
GOV.UK says you must tell HMRC about any benefit you start or stop getting from work, even if your employer has already dealt with the tax. For a car, use HMRC's Check or update your company car tax service; for other benefits, use Check your Income Tax, where you can check and update your company benefit details.
The company car service asks for the list price including VAT and accessories, whether a diesel meets Euro 6d, the CO2 figure, and the electric range for a hybrid at 1 to 50 g/km. It cannot be used if the benefit is payrolled, if you are in a car averaging or sharing scheme, or for a van.
GOV.UK says HMRC will tell you and your employer the new code within 15 working days; monthly paid staff should see it on the next or following payslip, weekly paid on the third. Tax over-deducted this year is usually refunded through your pay when the employer uses the new code.
A payrolled benefit is taxed through each payslip and is taken out of your code, so there is nothing to remove. From 6 April 2027 payrolling becomes mandatory for company cars, car fuel, vans, van fuel and medical benefits.

This guide is general information, not advice.

This guide is for an employee who has handed back a company car, given up private fuel, left a job that came with medical insurance, or otherwise stopped getting a benefit in kind, and whose tax code still carries it. How the benefit is valued is covered by the company car tax guide and the P11D and benefits in kind calculator.

By the end you will know why the benefit is still there, which HMRC service removes it, what it will ask you for, and when the corrected code and any refund reach your pay.

Before you start

Your Government Gateway sign-in. GOV.UK’s Check your Income Tax page says you will be told at sign-in if you need to prove your identity, which can involve photo ID such as a passport or driving licence.
Your National Insurance number, which HMRC’s Income Tax enquiries page says to have with you if you phone.
The date the benefit stopped and, for a car, the details GOV.UK’s company car service asks for: the list price including VAT and accessories, the CO2 emissions figure, whether a diesel meets Euro 6d, and the zero emission mileage (electric range) if it is a hybrid at 1 to 50 g/km.
Last year’s P11D, if you had one. GOV.UK says to keep benefit details for 2 years after the tax year they relate to.
Your latest payslip, to see the code being used and whether the benefit appears as pay (payrolled) or only through the code.

Step-by-step

1. Understand why the benefit is still there

HMRC’s PAYE Manual at PAYE12025 says “the majority of benefits and expenses information relating to CY-1 or CY and processed onto ECS from forms P11D” is “automatically coded for CY and CY+1”, and PAYE130040 marks car benefit and car fuel benefit as carried forward at annual coding. So a car you had all last year is assumed to continue. (The same page stops the carry-forward for benefits of a ceased primary employment “if there is no other live primary employment”, which helps next year’s code, not this one.)

Your employer reports a withdrawn car on a P46(Car), but only quarterly: GOV.UK’s employer page gives a deadline of 2 August for changes between 6 April and 5 July, then 2 November, 2 February, and 5 April online or 3 May on paper. GOV.UK’s why your tax code might change lists the employer telling HMRC as a trigger, but adds: “It’s your responsibility to make sure you’re paying the right amount of tax.”

2. Check whether the benefit is payrolled

GOV.UK’s payrolling guidance says that when an employer payrolls a benefit, “the tax codes for all employees receiving these benefits will be amended” to “take out the adjustment for their benefits in kind”, and “you do not have to submit a form P11D for benefits and expenses that you payroll”. The employer must send you a written notification of what was payrolled by 1 June after each tax year, and can only payroll benefits registered before 6 April 2026.

If the benefit is payrolled, the fix is with your employer’s payroll, not your code, and the company car service will not accept it. Go to step 5.

3. Report a company car change online

GOV.UK’s tax on company cars page says to tell HMRC if your car or fuel details change, including returning a car or your employer stopping fuel, and that “you can check or update your company car tax online”. The service, Check or update your company car tax, lets you “tell HM Revenue and Customs (HMRC) about any changes to your car since 6 April” and “update your fuel benefit”.

It cannot be used if you are “part of a car averaging or car sharing scheme”, if the benefit is payrolled, or for “a company commercial vehicle, such as a van”. GOV.UK’s instruction then: “Contact HMRC or your employer to update your details if you cannot do it online.”

4. Report any other benefit through Check your Income Tax

For medical insurance, a loan, accommodation or any other non-car benefit, sign in to Check your Income Tax, which lets you “tell HM Revenue and Customs (HMRC) about changes that affect your tax code”. GOV.UK’s if you think your tax code is wrong page says to check your “company benefit and expenses details” there and update anything wrong or missing. The reporting changes page says you “must tell HMRC about any benefits you or your family start or stop getting from work”, even if your employer “has already taken Income Tax and National Insurance for them”. If you left the job, update your employer details in the same service.

5. Phone if the online route is closed

The Income Tax helpline is 0300 200 3300, Monday to Friday 8am to 6pm, per HMRC’s contact page, which lists “your tax code” among the issues it helps with. It uses speech recognition software and may ask security questions.

Deadlines and what happens next

New code. GOV.UK’s tax code guidance says HMRC will “tell you and your employer the new tax code within 15 working days”. Paid monthly, “it should be on your next or the following payslip”; paid weekly, on your third payslip. If not, contact your employer.
Refund this year. GOV.UK’s paid too much or too little page says HMRC will “ask your employer or pension provider to refund the difference in your pay” and “this will usually happen when they use your new tax code”.
After 5 April. If the year’s tax was still wrong, HMRC sends a P800 or Simple Assessment letter between June and March of the following tax year. A refund claimed online arrives within 5 working days; a cheque you ask for takes 6 weeks; an automatic cheque comes within 14 days of the date on the letter.
From 6 April 2027. GOV.UK’s policy paper makes payrolling mandatory for company cars, car fuel, vans, van fuel and employer-provided medical benefits, with “most remaining benefits in kind” from April 2028. HMRC’s interim guidance confirms phase 1 from 6 April 2027 and says loans and accommodation “will remain voluntary”. A payrolled car is taxed on the payslip, not through the code, so this problem should become rare for cars.

Common mistakes

Waiting for the employer. The P46(Car) is quarterly and the P11D annual; GOV.UK puts the duty to report a stopped benefit on you.
Reporting a new car too early. GOV.UK says you “should only tell HMRC that you’ve got a company car once you’ve started using it”.
Using the car service for a van or a payrolled car. It will not accept either; contact HMRC or your employer.
Reading the benefit line as tax. The code figure is the benefit value taken off your tax-free amount, not the tax on it; the coding notice guide walks through it.
Assuming a refund needs a claim. In-year it usually comes through pay. After the year end, a P800 refund is claimed online or, in some cases, sent as a cheque without a claim.

Worked example

Personal Allowance £12,570 and basic rate 20% from the 2026/27 ruleset; coding method from GOV.UK’s what your tax code means (start with the allowance, take off deductions). The £3,600 benefit is illustrative, not a real car.

Your code was issued with a £3,600 car benefit carried forward from last year’s P11D. Tax-free amount: £12,570 less £3,600 = £8,970, so code 897L. At basic rate that collects 20% of £3,600, or £720, over the year: £60 a month.

You hand the car back on 31 May 2026. Under section 143 of ITEPA 2003 car benefit is reduced for days the car is unavailable, including days after it stops being available, in proportion to the days in the year. The car was available for 56 of the 365 days from 6 April 2026 to 5 April 2027, so the benefit falls to £3,600 × 56 ÷ 365, about £552, and the basic-rate tax on it to about £110 instead of £720. On the same coding method, £12,570 less £552 = £12,018, code 1201L. Your real figure depends on the car’s list price and CO2 band, and the tax over-deducted under 897L is usually refunded through pay once the new code is used.

Company car tax 2026/27 - how the benefit value that goes in your code is worked out.
P11D and benefits in kind calculator - the tax on a car, fuel or medical benefit at your marginal rate.
How to read a PAYE coding notice - every line of the P2, including the benefit deductions.

Frequently asked questions

I gave my company car back but it is still in my tax code. Why?

Because HMRC builds your code from the information it holds, and for benefits that is mostly last year's P11D. Its PAYE Manual says benefit details processed from P11Ds are automatically coded for the current year and the next, and lists car benefit as carried forward at annual coding. Your employer's own notice that the car was withdrawn goes in quarterly on a P46(Car), and the year-end P11D comes later still. GOV.UK says you must tell HMRC yourself when a benefit stops, so the fastest fix is to report it online.

How do I tell HMRC I no longer have a company car?

Use HMRC's Check or update your company car tax service, which GOV.UK says lets you check your car's details, tell HMRC about any changes to your car since 6 April, and update your fuel benefit. Have the list price including VAT and accessories, the CO2 emissions figure, whether a diesel meets Euro 6d, and the electric range if it is a hybrid at 1 to 50 g/km. If your employer payrolls the benefit, or you are in a car averaging or sharing scheme, or it is a van, the service cannot be used and GOV.UK says to contact HMRC or your employer instead.

How long does it take for my tax code to change after I report a benefit has stopped?

GOV.UK says HMRC will update your tax code and tell you and your employer the new code within 15 working days. If you are paid monthly the new code should be on your next or the following payslip; if weekly, on your third payslip. If it does not appear, speak to your employer. Tax over-deducted earlier in the year is usually refunded through your pay when the employer uses the new code.

What is the difference between a payrolled benefit and a benefit in my tax code?

A payrolled benefit is one your employer taxes through your pay each period. GOV.UK's payrolling guidance says that where an employer registered to payroll before 6 April 2026, the tax codes of the employees concerned are amended to take out the adjustment for the benefit, do not submit a P11D for it, and must give you a written statement of what was payrolled by 1 June after the tax year ends. A benefit that is not payrolled is reported on a P11D after the year and collected by reducing the tax-free amount in your code. Only the second kind needs removing from the code.

Will company cars still be in tax codes after April 2027?

For most employees, no. GOV.UK's policy paper says that from April 2027 reporting through payroll becomes mandatory for company cars, car fuel, vans, van fuel and employer-provided medical benefits, with most other benefits following in April 2028. HMRC's interim guidance gives the phase 1 date as 6 April 2027 and says loans and accommodation will remain voluntary. A payrolled benefit is taxed on the payslip rather than through a code deduction, so the problem this guide solves should largely disappear for cars from that date.