Company car tax

Car benefit charges based on CO2 emissions

Car benefit charges based on CO2 emissions

Car benefit charges based on CO2 emissions

Since April 2002 company car tax has been based on a car's list price for tax purposes (generally list price plus accessories, less capital contribution)  and official C02 emission figure.

Using HM Revenue & Customs benefit rules for each year, the official CO2 figure for the car (measured in grams per kilometre (g/km)) is converted to a percentage multiplier, applied to the list price for tax purposes to determine the taxable benefit charge for the year.

Initially the percentage multiplier increased 1% for each 5g/km increase in CO2 from a minimum of 15% at 155g/km or less, up to a maximum of 35%.  There was a 3% supplement for diesels up to the maximum of 35%.

Since CO2-based company car tax was introduced the lower threshold - the CO2 emissions figure used to set the 15% rate - has been lowered from time to time to encourage the take up of more fuel efficient vehicles.  Percentage multipliers below 15% have also been introduced for specific groups of cleaner vehicles.

 

Benefit in Kind (BIK)

Download table (pdf)

 

Budget 2014

Budget 2012 and Budget 2013 set out Company car tax rates and bands for 2016-17, including the removal of the diesel supplement. The appropriate percentage of the list price subject to tax will be 7% for the 0-50g/km CO2
band and 11% for the 51-75g/km CO2 band in 2016-17.

The appropriate percentage of list price subject to tax will increase by 2 percentage points for cars emitting more than 75g/km CO2 to a maximum of 37%, in both 2017-18 and 2018-19.

In 2017-18 there will be a 4 percentage point differential between the 0-50 and 51-75g/km CO2 bands and between the 51-75 and 76-94g/km CO2 bands. In 2018-19 this differential will reduce to 3 percentage points. The differential will reduce further to 2 percentage points in 2019-20 in line with the Budget 2013 announcement.

From 6 April 2015 the Fuel Benefit Charge multiplier for both cars and vans will increase by RPI.

Year by year

Tax year 2011/12

(From 6 April 2011)

  • no reductions for alternative fuels
  • diesel surcharge applies to all diesels
  • no cap (£80,000) on list price used to calculate taxable benefit
  • lower threshold (15% rate) reduced from 130g/km to 125g/km
  • A percentage multiplier of 0% applies to cars with zero CO2 emissions - cars that can't produce CO2 engine emissions under any circumstances when driven. This will revert to 9% from 2015 unless changed in a future budget.
  • A percentage multiplier of 5% applies to cars with CO2 emissions of 75g/km or less
  • A percentage multiplier of 10% applies to cars with CO2 emissions of 76g/km to 120g/km.
  • Above 120g/km the rate increases by 1% for every 5g/km from 15% to the maximum of 35% at 225g/km and above

Tax year 2012/13

(From 6 April 2012)

  • Special rules for qualifying low emissions cars (QUALECs) - CO2 emisisons of 120g/km or less will be abolished
  • The lower threshold (15% rate) will be reduced from 125g/km to 120g/km
  • The 0% rate continues to apply to cars with zero CO2 emissions
  • The 5% rate continues to apply to cars with CO2 emissions of 75g/km or less
  • The 10% rate applies only to cars with CO2 emissions from 76g/km to 99g/km
  • From 100g/km the rate is 11% and rises by 1% per 5g/km up to the maximum of 35% at 220g/km and above

Tax year 2013/14

(From 6 April 2013)

  • The lower threshold (15% rate) will be reduced from 120g/km to 115g/km
  • The 0% rate continues to apply to cars with zero CO2 emissions
  • The 5% rate continues to apply to cars with CO2 emissions of 75g/km or less
  • The 10% rate applies only to cars with CO2 emissions from 76g/km to 94g/km
  • From 95g/km the rate is 11% and rises by 1% per 5g/km up to the maximum of 35% at 215g/km and above

Tax year 2014/15

(From 6 April 2014)

The appropriate percentage of list price subject to tax will increase by one percentage point for cars emitting more than 75 grams/kilometre of carbon dioxide, to a maximum of 35 per cent in 2014–15, and by two percentage points, to a maximum of 37 per cent in both 2015–16 and 2016–17.

Tax year 2015/16

(From 6 April 2015)

The appropriate percentage of list price subject to tax will increase by two percentage points for cars emitting more than 75 grams/kilometre of carbon dioxide, to a maximum of 37% in both 2015–16 and 2016–17.

The appropriate percentage of the list price subject to tax for the 0-50 g/km CO2 band will be 5%

The appropriate percentage of the list price subject to tax for the 51-75 g/km CO2 band will be 9%

Tax year 2016/17

(From 6 April 2016)

The Government will remove the three percentage point diesel supplement differential so that diesel cars will be subject to the same level of tax as petrol cars.

The appropriate percentage of list price subject to tax will increase by two percentage points for cars emitting more than 75 grams/kilometre of carbon dioxide, to a maximum of 37% in 2016–17.

The appropriate percentage of the list price subject to tax for the 0-50 g/km CO2 band will be 7% in 2016-17.

The appropriate percentage of the list price subject to tax for the 51-75 g/km CO2 band will be 11% in 2016-17.

Tax year 2017/18

(From 6 April 2017)

The appropriate percentage of list price subject to tax will increase by 2 percentage points for cars emitting more than 75g/km CO2 to a maximum of 37%.

There will be a 4 percentage point differential between the 0-50 and 51-75g/km CO2 bands and between the 51-75 and 76-94g/km CO2 bands.

Tax year 2018/19

(From 6 April 2018)

The appropriate percentage of list price subject to tax will increase by 2 percentage points for cars emitting more than 75g/km CO2 to a maximum of 37%.

In 2018/19 the differential between the 0-50 and 51-75g/km CO2 bands and between the 51-75 and 76-94g/km CO2 bands will reduce to 3 percentage points.


Earlier budgets

Budget 2005

The 2005 budget included the announcement that the threshold for the minimum percentage charge rate would be frozen at 140g/km, up to and including 2007/08.

Budget 2006

The 2006 budget included the announcement that the threshold for the minimum percentage charge rate for calculating benefit in kind from company cars will be reduced from 140g/km of C02 to 135g/km C02 for 2008–09.

A new lower, 10% band for company cars with C02 emissions of 120g/km or lower - so called QUALECs (qualifying low emission vehicles - was also announced and came into effect in 2008–09.

From 2008/9 there is also a new 2% reduction for cars manufactured to be able to run on E85 fuel, a mixture of 85% bio-ethanol and 15% unleaded petrol. Other cars cannot run on this mixture without damaging the engine.

Budget 2009

The 2009 budget report included the following changes to company car tax scheduled to come into effect from 6 April 2011;

  • The basic threshold for the 15% band of company car tax will be reduced by 5g/km of CO2, so that this band will apply to cars emitting between 121 and 129g/km
  • Company car drivers in cars that produce more than 129g/km will see their tax bill increase by 1% for every 5g per km increase in CO2 emissions, to a maximum of 35%
  • Discounts currently available for Euro IV standard diesel cars registered before 1 January 2006, petrol-electric hybrid cars, road fuel gas powered cars and E85 biofuel-capable cars will be removed from 6 April 2011.
  • Hybrid cars emitting 120g/km or less will continue to fall within the 10% band and electric cars will continue to be subject to the 9% band, the lowest for any type of company car.
  • The cap on car list prices used to calculate the taxable benefit arising from company cars will be abolished so that drivers of expensive cars will be "subject to a fair level of tax".

Budget 2010

The Government indicated that it would reform company car tax to continue to provide an incentive to purchase the lowest emitting vehicles on the market.

From April 2012, the 10 per cent band for cars emitting 120g CO2 per km or less will be removed, and the system of bands will be extended so that they increase by one percentage point with every 5g CO2 per km increase in emissions, from 10 per cent.

This 10 per cent band will apply to cars that emit 99g of CO2 per km or less.

Budget 2011

To encourage businesses to use ultra low carbon cars, company car tax will be frozen for cars emitting less than 95g/km from April 2013.

Company car tax for all vehicles with carbon dioxide emissions between 95g/km and 219g/km will increase by 1 percentage point from the same date.

From 6 April 2011 the fuel benefit charge multiplier used to calculate the tax payable on free fuel for company cars will increase from £18,000 to £18,800.

Budget 2012

Company car tax rates 2014–16 – The appropriate percentage of list price subject to tax will increase by one percentage point for cars emitting more than 75 grams/kilometre of carbon dioxide, to a maximum of 35 per cent in 2014–15, and by two percentage points, to a maximum of 37 per cent in both 2015–16 and 2016–17.

From April 2015, the five-year exemption for zero carbon and ultra low carbon emission vehicles will come to an end as legislated in Finance Act 2010. The appropriate percentage for zero emission and low carbon vehicles will be 13 per cent from April 2015 and will increase by two percentage points in 2016–17.

From April 2016, the Government will remove the three percentage point diesel supplement differential so that diesel cars will be subject to the same level of tax as petrol cars.

Car fuel benefit charge (FBC) 2012–13 and 2013–14 – From 6 April 2012, the FBC multiplier for cars will increase from £18,800 to £20,200, and will increase by 2 per cent above the RPI in 2013-14. The Government commits to pre-announcing the FBC multiplier one year ahead.

Read more about Budget 2012 on the HM Treasury website

Budget 2013

  • From April 2015, two new Company car tax bands will be introduced for ultra low emission vehicles (ULEVs) at 0-50 g/km CO2 and 51-75 g/km CO2. (Finance Bill 2013)
  • The appropriate percentage of the list price subject to tax for the 0-50 g/km CO2 band will be 5% in 2015-16, and 7%  in 2016-17.
  • The appropriate percentage of the list price subject to tax for the 51-75 g/km CO2 band will be 9%  in 2015-16 and 11%  in 2016-17.
  • In 2017-18 there will be a 3 percentage point differential between the 0-50 and 51-75 g/km CO2 bands, and between the 51-75 and 76-94 g/km CO2 band.
  • In 2018-19 and 2019-20 there will be a 2 percentage point differential between the 0-50 and 51-75 g/km CO2 bands and between the 51-75 and 76-94 g/km CO2 bands. (Finance Bill 2013 and future ?nance bills)
  • In future years Company car tax rates will be announced three years in advance.
  • The Government says that it will review incentives for ULEVs in light of market developments at Budget 2016, to inform decisions on Company car tax from 2020-21 onwards.
  • From 6 April 2014 the Fuel benefit charge multiplier will increase by RPI for both cars and vans.


Rules prior to 2001/02

For tax years up to and including 2001/02 the taxable car benefit was based on business mileage:

The taxable benefit was:

  • 35% of the price of the car for business mileage less then 2,500 miles
  • 25% of the price of the car for business mileage between 2,500 and 17,999 miles, and
  • 15% of the price of the car for business mileage of 18,000 miles or more.

(Updated 20 March 2014)