The tax payable on your company car is governed by four factors:
the list price of the car, on the day before it was first registered, plus certain accessories,
the rate at which the car emits carbon dioxide (CO2),
the fuel type, (for most types of car, this is all the information you need to work out the taxable benefit)
your highest rate of income tax.
You can find your 2003/04 taxable percentage of the list price using the following table:
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How to find out how much CO2 your company car emits – see:
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Reliable emissions data is not widely available for cars registered before 1 January 1998. For them, the following taxable percentages of the list price apply, regardless of fuel type:
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Remember, too, that the rate of the taxable benefit will rise next year - for the comparative rates, simply deduct 10 from all the CO2 figures in the table – and may well rise again in 2005.
Starting from the emissions-based taxable benefit rate (15% or more – see the table), the taxable benefit is then discounted by:
cars running on electricity only, 6% (so, emissions being zero, the percentage of list price chargeable to tax is 9%)
for petrol/battery hybrids, 2% plus a further 1% for each 20g/km by which the CO2 emissions are less than 159
for diesels meeting Euro IV standards, 3% (that is, the 3% diesel supplement is waived for these cars)
for cars running on gas, 1%, plus a further 1% for each 20g/km by which the CO2 emissions are less than 159
for gas/petrol hybrids the discount varies – the discount is as for cars running on gas, alone, if the car was built after 31 December 1999 to run on both petrol and gas; for cars registered before1 January 2000, the discount will be calculated by first taking the petrol emissions rate, then discounting by 1%, then ignoring any premium charged by the manufacturer over the equivalent petrol model; for cars converted from petrol to petrol/gas hybrid running, the petrol rate is discounted by 1% and the conversion costs are ignored.
Pointer:
Employers and employees need to select their cars carefully, as the tax system favours cars with lower CO2 emissions. This can greatly reduce the amount of National Insurance contributions payable by the employer and the amount of benefit on which the employee or director has to pay income tax.
The Chancellor announced that the Government will begin a period of consultation on reform of the system for taxing company vans.
At present vans (including double cab pick-ups with a payload of no less than one tonne) attract a tax liability of no more than £200.
Mileage rates, for business travel, paid at the following rates will not attract a charge to tax or NICs:
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The Inland Revenue advisory rates can be applied as a tax-free maximum rate for employees claiming for petrol used on business journeys and for employees re-imbursing their employers with the cost of petrol used for private journeys. The Inland Revenue 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.
If the employee pays for the full cost of all fuel for private journeys (usually including home to work) there will be no car fuel benefit. In all other cases the full tax charge will be due.
The taxable car fuel benefit for 2003/04 is calculated by multiplying £14,400 by the same percentage as applies (or would apply) for the car benefit.
Example: A company car driver has a car which, on the day before it was first registered, had a list price of £18,000. It runs on petrol, and emits 182 g/km of CO2.
If we assume the driver pays tax at 40%, the annual tax bill on the car is: £18,000 x 20% x 40% = £1,440
If the employer provides any fuel used for private journeys and is not re-imbursed for the cost, the 2003/04 tax bill for the fuel is: £14,400 x 20% x 40% = £1,152.
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