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Taxation

From 2002 the taxation treatment of company cars was changed with a concentration on the environment. Benefit in kind taxation for individuals that have a car provide by their company is now based on the cleanliness of the car's engine rather than business mileage covered. Some argue that this penalises the people that really need a car to carry out their work rather than those that have a car as a perk.

To calculate the amount of tax that you will be due you need to know the full retail price of the car including options, the CO2 emission of the car and the tax band that you are in.

Use the table below to find out the percentage of the cars price to be taxed based on the CO2 emission. Multiply this by the cars cost to discover the taxable amount, and apply your tax bracket.

The minimum tax band starts at 15% of the list price for vehicles with emissions up to 165 grams per kilometre and rises in 5-gram bands to a maximum of 35% of a vehicles list price. Diesel cars attract a further 3% supplement to take into account their changing particular emissions.

The New Company Car Tax System

CO2 emissions in grams per kilometre Percentage of car's Price taxed
2003/04 2004/05 2005/06
155 145 140 15*
160 150 145 16*
165 155 150 17*
170 160 155 18*
175 165 160 19*
180 170 165 20*
185 175 170 21*
190 180 175 22*
195 185 180 23*
200 190 185 24*
205 195 190 25*
210 200 195 26*
215 205 200 27*
220 210 205 28*
225 215 210 29*
230 220 215 30*
235 225 220 31*
240 230 225 32*
245 235 230 33**
250 240 235 34***
255 245 240 35****


Diesel supplements:
* add 3% if car runs solely on diesel and is not euro IV compliant;
** add 2% if car runs solely on diesel; *** add 1% if car runs solely on diesel;
**** maximum charge so no diesel supplement.

n.b: The exact CO2 emissions figure should be rounded down to the nearest five grams per kilometre.

Car manufacturers have responded in two ways to these changes - more diesel engines and cleaner petrol engines. The changes have also resulted in more people opting out of company cars and looking for other ways of funding a car. Mileage allowances and increased salary are two ways, and the increase in personal leasing is plain to see.

Fuel Benefit in Kind charges
Benefit in Kind (BIK) taxation on free fuel has effects for both the company car driver and the employer and it is becoming less and less.attractive for company car drivers to receive 'free fuel' from their employers. A company car driver needs to compare the cost of paying for their own private fuel versus the tax they will pay under the fuel scale charge.

They should stop taking free fuel when the tax charge is higher than the actual cost of the fuel they receive. Company Car Tax Calculator helps make this calculation.

We have compiled a series of links to provide you with useful tax information.

Inland Revenue: Expenses and Tax Guide
Is a a guide to tax and national insurance contributions and treatment of company cars for employees and employers. It also outlines tax changes as of April 2002.

Benefits for Vehicles with a Co2 Emissions Figure
A useful resource on this aspect of taxation.

Co2 Emissions Finder
Allows you to enter vehicle makes and models to identify exact CO2 emissions rating of the vehicle.

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