CO2 Based Company Car Tax

CO2 emissions and company car tax rules

Since April 2002 company car tax has been based on a car's list price and official C02 emission figure.

Contact the Inland Revenue for more detailed information about company car tax.

The percentage used to calculate the benefit is based on carbon dioxide (CO2) emissions measured in grams per kilometre (g/km).

Initially a minimum charge of 15% of the car's price was applied to cars emitting CO2 at or below a specific level, measured in (g/km). This charge rises in 1% increments for every 5g/km over the minimum level (there is an upper ceiling of 35%).

Diesel cars: there is a supplement of 3% up to the maximum charge of 35%. This supplement was waived for diesel cars first registered before the end of 2005 that met the EC emissions standard known as Euro IV. The Euro Standard is shown on the registration document for cars first registered after 1 March 2001 and is also included in information available in The Car Buyer's Guide.

The table below shows the relationship between CO2 emissions and percentage.

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 was also announced and this too came into effect in 2008–09.

2009 Budget

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 gaas 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



Percentage charge relative to CO2 emissions (before discounts)
  2008/09 2009/10 2010/11 2011/12
CO2 Petrol Diesel Petrol Diesel Petrol Diesel Petrol Diesel
115             0.10 0.13
120 0.10 0.13 0.10 0.13 0.10 0.13 0.15 0.18
125 0.15 0.18 0.15 0.18 0.15 0.18 0.15 0.18
130 0.15 0.18 0.15 0.18 0.15 0.18 0.16 0.19
135 0.15 0.18 0.15 0.18 0.16 0.19 0.17 0.20
140 0.16 0.19 0.16 0.19 0.17 0.20 0.18 0.21
145 0.17 0.20 0.17 0.20 0.18 0.21 0.19 0.22
150 0.18 0.21 0.18 0.21 0.19 0.22 0.20 0.23
155 0.19 0.22 0.19 0.22 0.20 0.23 0.21 0.24
160 0.20 0.23 0.20 0.23 0.21 0.24 0.22 0.25
165 0.21 0.24 0.21 0.24 0.22 0.25 0.23 0.26
170 0.22 0.25 0.22 0.25 0.23 0.26 0.24 0.27
175 0.23 0.26 0.23 0.26 0.24 0.27 0.25 0.28
180 0.24 0.27 0.24 0.27 0.25 0.28 0.26 0.29
185 0.25 0.28 0.25 0.28 0.26 0.29 0.27 0.30
190 0.26 0.29 0.26 0.29 0.27 0.30 0.28 0.31
195 0.27 0.30 0.27 0.30 0.28 0.31 0.29 0.32
200 0.28 0.31 0.28 0.31 0.29 0.32 0.30 0.33
205 0.29 0.32 0.29 0.32 0.30 0.33 0.31 0.34
210 0.30 0.33 0.30 0.33 0.31 0.34 0.32 0.35
215 0.31 0.34 0.31 0.34 0.32 0.35 0.33 0.35
220 0.32 0.35 0.32 0.35 0.33 0.35 0.34 0.35
225 0.33 0.35 0.33 0.35 0.34 0.35 0.35 0.35
230 0.34 0.35 0.34 0.35 0.35 0.35 0.35 0.35
235 0.35 0.35 0.35 0.35 0.35 0.35 0.35 0.35

Notes

  • The discount system relating to bi-fuel and hybrid electric cars was simplified from April 2006 to replace the existing provision, with a 1% increase in the basic percentage discounts.
  • Cars without official CO2 emissions data are taxed according to engine size.
  • There are no special rules for a second company car.
  • Our calculators only apply to new cars, and therefore do not take into account the 3% discount that was applied to Euro IV diesel cars registered before 2006.
  • A new '10% band' was introduced from tax year 2008/09 for cars with a CO2 emissions figure of exactly 120 g/km or lower. The normal rounding does not apply to this figure. Diesel adjustments apply to these as to all others, but that is all; no other reduction which is available on other cars applies. As a result, the only acceptable figures for the appropriate percentage for qualifying low emission cars are 13% – cars to which the diesel supplement applies, and 10% – all other cars. Electric-only cars are excluded from these arrangements and retain their net appropriate percentage of 9%.
  • 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

Car tax calculations before the April 2002 changes

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

Taxable benefit up to 2001/02
Business miles in tax yearPercentage of price of car
less than 2,500 35%
2,500 to 17,999 25%
18,000 or more 15%
 

exceptions

Special rules applied to:

  • Older cars
  • Cars without an official list price
  • Cars that are not available for the whole tax year
  • Second company cars

Join the discussion in the AA zone

Other products & services

Car insurance quotes

Related information

Car tax

 

21 February 2011