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Company CarsThe system for taxing those who use company cars has remained fundamentally unchanged for some years, save for stepped changes in the emissions thresholds. The basis of the charge is to tax a figure calculated by multiplying the car's list price by an emissions-based percentage, with a 3% surcharge on diesel powered cars. The tax payable on your company car is governed by four factors:
You can find your 2005/06 taxable percentage of the list price using the following table: 2008/09 taxable benefits table
How to find out how much CO2 your company car emits – see:
Reliable emissions data is not widely available for cars registered before 1 January 1998. For them, the following taxable percentages of the list price apply, regardless of fuel type. Cleaner dieselsWhen the current system was introduced, it included a discount of 3% for diesel powered cars compliant with the Euro IV emissions standards, to encourage earlier take-up of 'cleaner diesels' and effectively cancelling the 3% surcharge on all diesel company cars. The Government is satisfied with the take-up of cars which are Euro IV compliant, and the 3% discount will therefore be withdrawn from 6 April 2006 for cars first registered after 31 December 2005. It will, however, continue to be given for Euro IV compliant cars registered up to and including that date. ExamplesAssuming emissions of 158g/km of CO2 and a list price of £18,000, the taxable benefit for three differently-fuelled cars for 2006/07 would be:
The discounts for certain 'cleaner' cars continue as before for 2005/06, but will be simplified for 2006/7. Mileage ratesMileage rates, for business travel, paid at the following rates will not attract a charge to tax or NICs:
HM Revenue & Customs advisory rates can be applied as a tax-free maximum rate for employees claiming for petrol used on business journeys and for employees re-imbursing their employers with the cost of petrol used for private journeys. HM Revenue & Customs will consider claims for a higher maximum rate, if it can be demonstrated that it is necessary for an employee to use a car with higher than average fuel costs. Car fuel benefitsIf the employee pays for the full cost of all fuel for private journeys (usually including home to work) there will be no car fuel benefit. In all other cases the full tax charge will be due. The taxable car fuel benefit for 2005/06 is calculated by multiplying £14,400 by the same percentage as applies (or would apply) for the car benefit. Example: A company car driver has a car which, on the day before it was first registered, had a list price of £18,000. It runs on petrol, and emits 182 g/km of CO2. If we assume the driver pays tax at 40%, the annual tax bill on the car is: £18,000 x 23% x 40% = £1,656. If the employer provides any fuel used for private journeys and is not re-imbursed for the cost, the 2005/06 tax bill for the fuel is: £14,400 x 23% x 40% = £1,324.80. VAT on scale charge for quarters commencing on or after 1 May 2005
Company vansFrom 6 April 2005 there will be no taxable benefit where employees have to take their company vans home and are not allowed any other private use. Otherwise, the taxable benefit for the private use of a company van and fuel, if supplied, is £500 or £350 (vans less or more than four years old) per annum, until 5 April 2007. With effect from 6 April 2007 the taxable benefit for the unrestricted use of company vans will be £3,000 (with no reduction for older vans) plus a further £500 of taxable benefit if fuel is provided by the employer for private travel. The maximum tax payable on the use of a company van will therefore increase from April 2007 from £200 to £1,400 p.a., and the employer's Class1A NIC payable will increase from £64 to £448 p.a.
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