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Making company cars less taxing

Company car tax is a minefield. Now based on CO² emissions, it’s no longer based on the number of miles you drive - it’s all about how you drive them. Choose a car with high emissions and you’ll pay tax on 35% of its total price, for example.

Introduced in April 2003 as a way to encourage business drivers to buy fuel-efficient cars, it is part of the Government’s strategy to reduce CO² emissions. With half of all cars in the UK registered as fleet vehicles, it’s a way of encouraging company car drivers to think about reducing greenhouse gases - and the tax they pay.

But like all taxes, it can be confusing. So let’s look at how you work out how much tax you’ll be paying on your company car.

1.  Work out the value of your car

The first step is the list price of the car plus delivery charges, taxes, VAT, car tax and any accessories. This is an important point because if you put some of your own money into the car - or avoid some of those tempting accessories - it reduces your company car tax in direct proportion to the amount invested or reduced. If a company car is only available for part of the tax year, that also lowers the liability. If the list price of the car was £20,000, for example, but you get it half way through the tax year, the amount on which it will be taxed falls to £10,000.

Let’s keep this simple and presume you’ve been given a company car worth £10,000 at the start of the tax year. So your tax liability is £10,000.

2.  Check the CO² emissions

The next step is the level of CO² the car produces. For all cars registered in the UK after 1 January 1998, this is based on a sliding scale that starts at 140 g/km and rises to 240 g/km, with a supplement for diesel-engined cars.

The company car tax for cars registered before this is based on engine size - 15% for engines up to 1,400cc, 22% for engine sizes up to 2,000cc, and 32% for bigger engines.

If you don’t know the CO² emission of the vehicle, incidentally, the website of the Vehicle Certification Agency (VCA) at http://www.vcacarfueldata.org.uk has a searchable database that shows the figures by make and model. You can then use this figure and match it on the following table:

 

CO2 (g/km) 2005/6 & 2006/7	% of P11D price to be taxed	Diesel supplement
140	15	add 3%
145	16	“
150	17	“
155	18s	“
160	19	“
165	20	“
170	21	“
175	22	“
180	23	“
185	24	“
190	25	“
195	26	“
200	27	“
205	28	“
210	29	“
215	30	“
220	31	“
225	32	“
230	33	add 2%
235	34	add 1%
240	35	no supplement