Company Cars

Car benefit

The threshold CO₂ emissions rate has been frozen at 140 g/km until 5 April 2008. The threshold for 2008/09 will be 135g/km. The rate of the taxable benefit ranges from 15% to 35% of list price (plus certain accessories) for most petrol or diesel-powered cars.

You can find your taxable percentage of the list price for 2006/07 using the following table:

Diesel cars are generally subject to a 3% surcharge - with some exceptions, the taxable benefit for a diesel car is 3% higher than for a petrol car with identical CO₂ emissions. The 3% surcharge was waived for cars which complied with Euro IV emissions standards, and this applies to 5 April 2006. Thereafter, the waiver applies only to Euro IV compliant cars first registered no later than 31 December 2005.

The discounts for lower emissions vehicles are simplified from 6 April 2006, at:

-   2% for bi-fuel lpg and petrol cars manufactured or converted before type approval
-   3% for hybrid electric and petrol cars
-   6% for electric-only cars.

It is also worth noting that while the costs of converting to bi-fuel lpg and petrol after type approval are excluded from the calculation of car benefit, there is no discount for such cars, after 5 April 2006.

In addition, with effect from 2008/09, there will be a reduced taxable percentage rate of 10% for those cars with CO₂ emissions of 120 g/km or less.

Car fuel benefit

The multiplier for car fuel benefit has not changed since the current scheme was introduced. It stands at £14,400.

Car and fuel benefit calculation

The amount chargeable to income tax (user) and Class 1A national insurance contributions (employer) for 2006/07 is calculated by multiplying list price (car benefit) or the fuel multiplier (fuel benefit) by a percentage based on the rate at which the car emits carbon dioxide (CO₂, in g/km) (see table above).

Take a car with a list price of £18,000 when it was first registered (say 31 March 2006) and which emits carbon dioxide at a rate of 180 g/km.

Company vans

With a fundamental change due in 2007, no changes were announced for 2006/07. Currently, company van users whose private travel is permitted to go beyond home to work are taxed on £500 benefit (£350 if the van is more than four years old), covering the use of the van and fuel. From April 2007, such users will be taxable on £3,000 for the use of the van, plus a further £500 if the employer provides fuel.

VAT on scale charge for quarters commencing on or after 1 May 2006

Mileage rates

Changes to the HM Revenue & Customs business mileage rates are announced from time to time.
The current rates are as follows:

The HM Revenue & Customs advisory rates can be applied as a tax-free maximum rate for employees claiming for petrol used on business journeys and for employees reimbursing their employers with the cost of petrol used for private journeys. HM Revenue & Customs will consider claims for a higher maximum rate, if it can be demonstrated that it is necessary for an employee to use a car with higher than average fuel costs.

Car costs – VED rates

* Cars registered from 23 March 2006