Chargeable on employees earning £8,500 or over (including benefits), and directors.
The taxable benefit is calculated as a percentage of the list price of the car, on the day before it was first registered, plus certain accessories. This percentage depends upon the rate at which the car emits carbon dioxide (CO2), and the fuel type.
From April 2015, the five year exemption for zero carbon and the lower rate for ultra-low carbon emission cars came to an end. Two new bands were introduced for ultra-low emission vehicles (ULEVs). These were set at 0-50 g/km (5%) and 51-75 g/km (9%). The appropriate percentages for the remaining bands increased by 2% for cars emitting more than 75 g/km, to a new maximum of 37%.
You can find the appropriate percentage for 2016/17 using the following table:
|Petrol %||Diesel %|
|200 and above||37|
For all cars first registered from at least November 2000, the definitive CO2 emissions figure for tax purposes is recorded on the Vehicle Registration Document (V5). Under an agreement with HM Revenue & Customs (HMRC), the Society of Motor Manufacturers and Traders (SMMT) is providing a CO2 emissions enquiry service on their website at www.smmt.co.uk for cars first registered from January 1998.
Reliable emissions data is not widely available for cars registered before 1 January 1998. For them, the following taxable percentages apply, regardless of fuel type:
|Engine capacity||Taxable %|
|Up to 1400cc||15%|
|1401 - 2000cc||22%|
The taxable car fuel benefit, for 2016/17, is calculated by applying the CO2 based car benefit percentage to the car fuel benefit charge multiplier of £22,200.
If 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.
|Fuel-Only Mileage Rates|
|HMRC advisory mileage rates at the time of the Budget for employee private mileage reimbursement or employer reimbursement of business mileage in company cars are:|
|1400cc or less||10p||7p|
|1401cc - 2000cc||12p||8p|
|1600cc or less||8p|
|1601cc - 2000cc||10p|
Example: A company car driver has a car which, on the day before it was first registered, had a list price of £21,000. It runs on petrol, and emits 177 g/km of CO2.
If we assume the driver pays tax at 40%, the 2016/17 tax bill on the car is: £21,000 x 32% x 40% = £2,688
If the employer provides any fuel used for private journeys and is not reimbursed for the cost, the 2016/17 tax bill for the fuel is: £22,200 x 32% x 40% = £2,842.
The taxable benefit for the unrestricted use of company vans is £3,170 plus a further £598 of taxable benefit if fuel is provided by the employer for private travel.
|Van and fuel charge||Van||Fuel||Total|
|Tax (20% taxpayer)||£634||£119.60||£753.60|
|Tax (40% taxpayer)||£1,268||£239.20||£1,507.20|
|Tax (45% taxpayer)||£1,426.50||£269.10||£1,695.60|
|Employer's class 1A NICs||£437.46||£82.52||£519.98|
Van drivers can avoid a benefit charge if they agree not to use the van for personal journeys. Driving to and from work is acceptable so long as there is a reasonable amount of business use.
The flat rate of £3,170 is reduced by 80% to £634 for vans which cannot produce C02 engine emissions under any circumstances when driven. There is no fuel benefit for such vans.
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