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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.
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.
(From 6 April 2011)
(From 6 April 2012)
(From 6 April 2013)
(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.
(From 6 April 2015)
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.
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 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 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.
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.
The 2009 budget report included the following changes to company car tax scheduled to come into effect from 6 April 2011;
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.
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.
For tax years up to and including 2001/02 the taxable car benefit was based on business mileage:
The taxable benefit was:
(Updated 22 March 2012)
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