BUDGET 2006 - 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 135g/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:

CO2 in g/km Taxable % CO2 in g/km Taxable % CO2 in g/km Taxable % Petrol Diesel Petrol Diesel Petrol Diesel Less than 145 15% 18% 175 to 179 22% 25% 210 to 214 29% 32% 145 to 149 16% 19% 180 to 184 23% 26% 215 to 219 30% 33% 150 to 154 17% 20% 185 to 189 24% 27% 220 to 224 31% 34% 155 to 159 18% 21% 190 to 194 25% 28% 225 to 229 32% 35% 160 to 164 19% 22% 195 to 199 26% 29% 230 to 234 33% 35% 165 to 169 20% 23% 200 to 204 27% 30% 235 to 239 34% 35% 170 to 174 21% 24% 205 to 209 28% 31% 240 and over 35% 35%

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 2021) 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 2006/07 2007/08 (inc. fuel) 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 NICs £64 £448

VAT on scale charge for quarters commencing on or after 1 May 2021

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 Gas 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 2021

Other budget information pages:

• Introduction
• Budget Highlights
• Business Tax & Investment Incentives
• Capital Taxes
• Duties
• Income Tax & Personal Savings
• Value Added Tax
• Company Cars
• National Insurance
• Other Measures Announced