18 March 2010

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Company car tax in 2010/11

The company car tax thresholds will tighten further with effect from 6th April 2011 by 5g per kilometre in addition to the 5g change announced last year, which takes effect from 6th April 2010.

The following abbreviated table demonstrates the progressive narrowing of the 15 per cent band which serves to increase the taxation charge for the bands which follow.

The net effect is to increase the company car benefit in kind tax year by year on all vehicles except those emitting 120g CO2 per kilometre or less.

2009/10		2010/11		2011/12
Emissions g/km	% P11d value**	Emissions g/km	% P11d value**	Emissions g/km	% P11d value**
120	10	120	10	120	10
121 – 139	15	121- 134	15	121 – 129	15
140 – 144	16	135 – 139	16	130 – 134	16

* +3% for diesel cars

From 2012/13 the scales will be reviewed, while retaining the incentive to purchase the lowest emitting vehicles. The company car tax bands will be extended so that they increase by 1 per cent with every 5g CO2 per kilometre increase in emissions, in a linear manner from the 10 per cent starting point.

Specific rates and thresholds will be announced in future budgets

Other detail changes from 6th April 2011 include:

Drivers of Euro IV diesel cars registered before the 1st January 2006 are currently taxed at the same percentage rate as drivers of cars fitted with a petrol engine. The taxation of these cars will be subject to the 3 per cent uplift for diesel cars from this date
Discounts for alternative fuelled cars (e.g. LPG) will be abolished as will those for hybrids emitting 121g CO2 per kilometre or more
The current £80,000 cap on vehicle P11d value will be removed, increasing the tax paid on the small number of company vehicles above this level
All electric cars will be exempt from company car tax for five years
All electric vans will be exempt from van benefit charge for five years
A 100% first-year allowance will be provided for the purchase of electric vans, subject to confirming compatibility with state aid rules
Electric cars will continue to be subject to the 9 per cent band, after the first five years
Consideration will be given to abolishing the diesel supplement in company car tax for diesel cars which comply with the future Euro VI emission and air quality standards in advance of their planned introduction in 2014.

Company car tax in 2012

Company car tax will be reformed from April 6, 2012 to further encourage the uptake of low emission vehicles.

Having already announced increases in company car benefit-in-kind tax charges for 2010/11 and 2011/12, the Chancellor will tighten thresholds by a further 5 g/km in 2012/13

As stated in the spring 2009 Budget, the Chancellor will abolish the special 10% benefit-in-kind tax rate for company cars emitting 120 g/km or less, which has been in place since April 2008.

Instead, the 10% tax rate will apply to company cars with emissions up to 99 g/km. Additionally, the system of bands will then increase by one percentage point with every 5 g/km of from 10%.

Author: Lee Sibbald, April 4, 2008

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