John Harrison and Company - Chartered Accounts

09-Oct-2011 The income tax charge on the valuable benefit of having a company car available for your private use is often changed, so as to encourage car makers and drivers to lower CO2 emissions. Plenty of notice is usually given of each change, given that naturally it is not realistic to expect anyone to be able to change the company car without a good deal of lead time.

Here is what is happening over the next few tax years, and don’t forget that diesel cars face a 3% supplement on the tax charge which is not planned to change. 

• The level of CO2 emissions qualifying for the basic minimum income tax charge of 15% of the car’s list price is currently 125 g/km for 2011/12 and there is a special lower charge of 10% of list price where CO2 emissions do not exceed 120 g/km. All that changes from 2012/13 with a new emissions scale starting at 10% for 76 to 99 g/km, rising by 1% per 5g/km to the usual maximum of 35%. So in 2012/13 if you have a company car with CO2 emissions of 120 to 124 g/km you will face a tax charge on 15% of list price instead of 10%. That’s a 50% increase in your tax bill! 
• From 2013/14 the taxable benefit % increases by 1% for a car with CO2 emissions of at least 95 g/km, but at the moment the plan is to keep the top tax charge on 35% of list price. The latter applies where CO2 emissions are at least 220 g/km, so essentially the 1% hike covers cars of between 95 and 219 g/km.

All this means it is essential to review your company car – whether as user or provider.  We are able to advise anyone fully of the position, whether you are an employee or an employer, plus how to minimise the tax charge over the next few years.

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