Being an accountant in Northumberland isn’t easy as it usually involves a fair amount of travel by road. With bus routes being limited cars are more of a necessity than a luxury to go about the working week. Company cars and the way they are taxed is often a topic of conversation that pops up.
If you have a Company Car the tax charge is calculated by multiplying the car’s list price by an emissions-based percentage (the “appropriate percentage”), with a 3% surcharge on diesel powered cars.
The maximum taxable value of the benefit is 35% of the list price of the car when first registered. The list price includes car tax (if applicable), Value Added Tax and delivery charges. The percentage reduces as the CO2 emissions reduce. If you are lucky enough to have a car which produces less than 139 g/km of CO2 then you get the lowest percentage of 15%.
Cars running solely on diesel fuel are subject to a 3% supplement. Special rules apply to cars running on electricity, electricity and petrol, gas or petrol and gas, and E85 fuel, which are generally seen as more environmentally friendly. For cars which cannot produce CO2 emissions under any circumstances when driven, the appropriate percentage is reduced to 0%, thereby reducing the car benefit charge for “electric cars” to nil.
Cars with higher levels of CO2 emission are taxed on a graduated scale rising to a maximum (for both petrol and diesel) of 35% of the car’s price.
From April 2015, the five-year exemption of zero carbon and ultra-low carbon emission vehicles will come to an end. Instead, there will be two new appropriate percentage bands for ultra-low emission vehicles (ULEVs). These will be introduced at 0-50 g/km CO2 (5%) and 51-75 g/km CO2 (9%). The remaining appropriate percentages will be increased by 2% for cars emitting more than 75% g/km CO2 to a new maximum of 37%.
From April 2016, all the appropriate percentages will be increased by 2% up to a maximum of 37%. The 3% diesel supplement will be removed, so that diesel cars will be subject to the same level of tax as petrol cars.
Choosing a company car to run around the Scottish Borders or Northumberland in for the next few years will have tax consequences for you in the years to come. So think carefully and please consult your accountant before buying a company car. In a future blog we’ll talk about the company van as they have another tax treatment!