Company Cars Don’t Have to be Expensive

‘...50% of employers currently providing company cars were aware that list price and CO2 (or at least pollution or fuel consumption in a more general sense) were the main determinants of tax and NICs liability on company cars.’

That 50% were unaware is worrying, but it doesn’t mean that a car has to be an expensive perk. The starting point to calculate the tax bill is the list price of the vehicle and not the price paid. List prices are recorded in popular car magazines. The exhaust emissions of the car are then used to find a percentage (see table below), which is applied to the list price. This will give the value of the benefit of the car which will then be taxed.

Example
Brian has a company car throughout 2006/07. The car is a petrol car with a list price of £20,000 and has CO2 emissions of 212 g/km. The relevant percentage is 29%, so the benefit is £5,800 (£20,000 @ 29%). If Brian is a higher rate taxpayer, his tax bill will be £2,320 (£5,800 @ 40%). The employer will be liable to Class 1A NICs of £742 (£5,800 @ 12.8%).

A ‘dirty’ car can be expensive but there are discounts for cleaner cars. If you would like to research emission levels and ‘clean’ cars, a good starting point is www.comcar.co.uk

The computation of the benefit can become quite complicated. Please talk to us if you would like to know more about the tax efficient provision of company cars or would like help with calculating the benefits.

Company cars 2006/07 and 2007/08
CO2 emissions (gm/km)
(round down to nearest 5gm/km)
% of car’s list price taxed
Fuel benefit (£14,400 x %)
£
 Company cars
  • For diesel cars add a 3% supplement, but maximum still 35%. This is waived for Euro IV diesels. For 2006/07, no waiver for diesels registered on/after 1 January 2006.
  • Discounts apply to certain environmentally friendly cars.
  • For cars registered before 1.1.98 charge is based on engine size.
  • The list price includes accessories and is subject to an upper limit of £80,000.
  • List price is reduced for capital contributions made by the employee up to £5,000.

Fuel benefits

  • The fuel benefit charge is proportionately reduced if provision of private fuel ceases part way through the year.
  • The fuel benefit is reduced to nil only if the employee pays for all private fuel.
up to 140
15
2,160
145
16
2,304
150
17
2,448
155
18
2,592
160
19
2,736
165
20
2,880
170
21
3,024
175
22
3,168
180
23
3,312
185
24
3,456
190
25
3,600
195
26
3,744
200
27
3,888
205
28
4,032
210
29
4,176
215
30
4,320
220
31
4,464
225
32
4,608
230
33
4,752
235
34
4,896
240 and above
35
5,040