22 March 2006 Budget Report

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 135 g/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:

2008/09 taxable benefits table

CO₂ in g/km*	Taxable %		CO₂ in g/km*	Taxable %
CO₂ in g/km*	Petrol	Diesel	CO₂ in g/km*	Petrol	Diesel
Less than 121	10%	13%	185 to 189	25%	28%
121 to 139	15%	18%	190 to 194	26%	29%
140 to 144	16%	19%	195 to 199	27%	30%
145 to 149	17%	20%	200 to 204	28%	31%
150 to 154	18%	21%	205 to 209	29%	32%
155 to 159	19%	22%	210 to 214	30%	33%
160 to 164	20%	23%	215 to 219	31%	34%
165 to 169	21%	24%	220 to 224	32%	35%
170 to 174	22%	25%	225 to 229	33%	35%
175 to 179	23%	26%	230 to 234	34%	35%
180 to 184	24%	27%	235 and over	35%	35%
* The exact CO₂ figure is rounded down to the nearest 5g/km

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.

Car benefit	Petrol	Diesel
List price	£18,000	£18,000
Taxable percentage	23%	26%
Taxable benefit	£4,140	£4,680
Tax (22% taxpayer)	£911	£1,030
Tax (40% taxpayer)	£1,656	£1,872
Employer’s Class 1A NIC	£530	£599

Fuel benefit	Petrol	Diesel
Multiplier	£14,400	£14,400
Taxable percentage	23%	26%
Taxable benefit	£3,312	£3,744
Tax (22% taxpayer)	£729	£824
Tax (40% taxpayer)	£1,325	£1,498
Employer’s Class 1A NIC	£424	£479

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.

Van and fuel charge (inc. fuel)	2006/07	2007/08
Van more than four years old
Tax (22% taxpayer)	£77	£770
Tax (40% taxpayer)	£140	£1,400
Employer’s class 1A NICs	£44.80	£448
Van less than four years old
Tax (22% taxpayer)	£110	£770
Tax (40% taxpayer)	£200	£1,400
Employer’s Class 1A NIC	£64	£448

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

Engine Size	Petrol	Diesel
Up to 1400cc	£40.66	£38.72
1401 - 2000cc	£51.53	£38.72
Over 2000cc	£75.66	£49.30

Mileage rates

Changes to the HM Revenue & Customs business mileage rates are announced from time to time.

The current rates are as follows:

Vehicle	First 10,000 miles	Thereafter
Car / Van	40p	25p
Motorcycle	24p	24p
Bicycle	20p	20p

Car – fuel only advisory rates
Engine capacity	Petrol	Diesel	LPG
up to 1400cc	10p	9p	7p
1401 - 2000cc	12p	9p	8p
Over 2000cc	16p	13p	10p

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

Band	CO₂ emissions g/km	Petrol	Diesel
A	100 and below	£0	£0
B	101 - 120	£40	£50
C	121 - 150	£100	£110
D	151 - 165	£125	£135
E	166 - 185	£150	£160
F	186 - 225	£190	£195
G*	226 and above	£210	£215
* Cars registered from 23 March 2006



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