22 March 2006 Budget Report |
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Company Cars
Car Benefit
The threshold CO2 emissions rate has been frozen at 140 g/km until 5 April 2008. The threshold for 2008/09 will be 135 g/km. The rate of the taxable benefit ranges from 15% to 35% of list price (plus certain accessories) for most petrol or diesel-powered cars.
You can find your taxable percentage of the list price for 2006/07 using the following table:
2008/09 taxable benefits table
| CO2 in g/km* | Taxable % | CO2 in g/km* | Taxable % | ||
|---|---|---|---|---|---|
| Petrol | Diesel | Petrol | Diesel | ||
| Less than 121 | 10% | 13% | 185 to 189 | 25% | 28% |
| 121 to 139 | 15% | 18% | 190 to 194 | 26% | 29% |
| 140 to 144 | 16% | 19% | 195 to 199 | 27% | 30% |
| 145 to 149 | 17% | 20% | 200 to 204 | 28% | 31% |
| 150 to 154 | 18% | 21% | 205 to 209 | 29% | 32% |
| 155 to 159 | 19% | 22% | 210 to 214 | 30% | 33% |
| 160 to 164 | 20% | 23% | 215 to 219 | 31% | 34% |
| 165 to 169 | 21% | 24% | 220 to 224 | 32% | 35% |
| 170 to 174 | 22% | 25% | 225 to 229 | 33% | 35% |
| 175 to 179 | 23% | 26% | 230 to 234 | 34% | 35% |
| 180 to 184 | 24% | 27% | 235 and over | 35% | 35% |
| * The exact CO2 figure is rounded down to the nearest 5g/km | |||||
Diesel cars are generally subject to a 3% surcharge - with some exceptions, the taxable benefit for a diesel car is 3% higher than for a petrol car with identical CO2 emissions. The 3% surcharge was waived for cars which complied with Euro IV emissions standards, and this applies to 5 April 2006. Thereafter, the waiver applies only to Euro IV compliant cars first registered no later than 31 December 2005.
The discounts for lower emissions vehicles are simplified from 6 April 2006, at:
- 2% for bi-fuel lpg and petrol cars manufactured or converted before type approval
- 3% for hybrid electric and petrol cars
- 6% for electric-only cars.
It is also worth noting that while the costs of converting to bi-fuel lpg and petrol after type approval are excluded from the calculation of car benefit, there is no discount for such cars, after 5 April 2006.
In addition, with effect from 2008/09, there will be a reduced taxable percentage rate of 10% for those cars with CO2 emissions of 120 g/km or less.
Car fuel benefit
The multiplier for car fuel benefit has not changed since the current scheme was introduced. It stands at £14,400.
Car and fuel benefit calculation
The amount chargeable to income tax (user) and Class 1A national insurance contributions (employer) for 2006/07 is calculated by multiplying list price (car benefit) or the fuel multiplier (fuel benefit) by a percentage based on the rate at which the car emits carbon dioxide (CO2, in g/km) (see table above).
Take a car with a list price of £18,000 when it was first registered (say 31 March 2006) and which emits carbon dioxide at a rate of 180 g/km.
| Car benefit | Petrol | Diesel |
| List price | £18,000 | £18,000 |
| Taxable percentage | 23% | 26% |
| Taxable benefit | £4,140 | £4,680 |
| Tax (22% taxpayer) | £911 | £1,030 |
| Tax (40% taxpayer) | £1,656 | £1,872 |
| Employer’s Class 1A NIC | £530 | £599 |
| Fuel benefit | Petrol | Diesel |
| Multiplier | £14,400 | £14,400 |
| Taxable percentage | 23% | 26% |
| Taxable benefit | £3,312 | £3,744 |
| Tax (22% taxpayer) | £729 | £824 |
| Tax (40% taxpayer) | £1,325 | £1,498 |
| Employer’s Class 1A NIC | £424 | £479 |
Company vans
With a fundamental change due in 2007, no changes were announced for 2006/07. Currently, company van users whose private travel is permitted to go beyond home to work are taxed on £500 benefit (£350 if the van is more than four years old), covering the use of the van and fuel. From April 2007, such users will be taxable on £3,000 for the use of the van, plus a further £500 if the employer provides fuel.
| Van and fuel charge (inc. fuel) | 2006/07 | 2007/08 |
| Van more than four years old | ||
| Tax (22% taxpayer) | £77 | £770 |
| Tax (40% taxpayer) | £140 | £1,400 |
| Employer’s class 1A NICs | £44.80 | £448 |
| Van less than four years old | ||
| Tax (22% taxpayer) | £110 | £770 |
| Tax (40% taxpayer) | £200 | £1,400 |
| Employer’s Class 1A NIC | £64 | £448 |
VAT on scale charge for quarters commencing on or after 1 May 2006
| Engine Size | Petrol | Diesel |
| Up to 1400cc | £40.66 | £38.72 |
| 1401 - 2000cc | £51.53 | £38.72 |
| Over 2000cc | £75.66 | £49.30 |
Mileage rates
Changes to the HM Revenue & Customs business mileage rates are announced from time to time.
The current rates are as follows:
| Vehicle | First 10,000 miles | Thereafter |
| Car / Van | 40p | 25p |
| Motorcycle | 24p | 24p |
| Bicycle | 20p | 20p |
| Car – fuel only advisory rates | |||
| Engine capacity | Petrol | Diesel | LPG |
| up to 1400cc | 10p | 9p | 7p |
| 1401 - 2000cc | 12p | 9p | 8p |
| Over 2000cc | 16p | 13p | 10p |
The 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 reimbursing 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 costs – VED rates
| Band | CO2 emissions g/km | Petrol | Diesel |
| A | 100 and below | £0 | £0 |
| B | 101 - 120 | £40 | £50 |
| C | 121 - 150 | £100 | £110 |
| D | 151 - 165 | £125 | £135 |
| E | 166 - 185 | £150 | £160 |
| F | 186 - 225 | £190 | £195 |
| G* | 226 and above | £210 | £215 |
| * Cars registered from 23 March 2006 | |||
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