Vehicle taxation

Company cars

Tax and national insurance contributions (NICs) are calculated on the benefit-in-kind (BIK) on a car, which is determined, principally, by the price of the car and its offical CO₂ emissions rating. The list price of the car when new (including most accessories) is multiplied by the indicated percentage from the table below, using the offical emissions rating for the appropriate fuel of the car to derive the BIK.

2012/13 company car taxable benefits table

*The exact CO₂ figure is rounded down to the nearest 5g/km.

Cars that cannot emit CO₂ by being driven have a benefit of 0%.

Current advisory fuel mileage rates (for a company car)

*1600cc for diesel cars
**1601cc for diesel cars

These rates are normally reviewed quarterly depending on changes in the price of fuel, and changes (if any) take effect on 1 March, 1 June, 1 September and 1 December each year, so the next change in rates will be due on 1 September 2012.

If the employee uses a privately owned car for business journeys, the employer may reimburse the costs at the following standard rates without the employee incurring a tax or NIC charge.

  
If the employer reimburses at a lower rate per mile, the employee is permitted to claim tax relief on the shortfall.

Vehicle excise duty rates for cars from 1 April 2012

*Includes cars emitting over 225g/km registered between 1 March 2001 and 23 March 2006.

There is a discount of £10 for cars using alternative fuel.

For cars registered before 1 March 2001 the VED is £135 for engines less than 1549cc, £220 for 1549cc and above.

Company car fuel benefit

The company car fuel benefit is calculated by multiplying a factor by the same percentage as is used to calculate the car benefit which for 2012/13 is £20,200 (2011/12 £18,800).

Vehicle taxation

Legislation will be introduced in Finance Bill 2012 to increase by one percentage point the level of the relevant percentage of the list price for company cars that is subject to tax. The tax charge applies to cars emitting more than 75g of carbon dioxide per kilometre up to a maximum of 35%. In both 2015/16 and 2016/17, the appropriate percentages of the list price subject to tax will increase by 2%, to a maximum of 37%.

There is currently a diesel supplement but this will be removed in April 2016, as diesel cars will be required to have the same air emissions quality as petrol cars from September 2015.

Company car tax fuel benefit charge

There is currently a tax charge on employees who receive free fuel from their employers and do not make a reimbursement to cover the cost of the private usage of the fuel. The fuel benefit is based on the same percentage as that used to compute the car benefit and depends upon the carbon dioxide emissions of the vehicle.

The fuel benefit charge is calculated by multiplying the appropriate percentage and the fuel multiplier of £20,200 from 6 April 2012 (previously £18,800). There is a further intention to increase the £20,200 from 6 April 2013 by two % above the annual rate of RPI increase to September 2012.