Braking point?

AuthorHull, Gary
PositionTax on company cars - Statistical Data Included

The new taxation regime could mark the end of the road for many company cars, but Gary Hull believes that it's more likely to make employers stop and consider the alternatives

Company car drivers will soon see a change in the way that the government taxes them. The aim is that the new system will reduce vehicle emissions as part of the quest for a cleaner environment. But the changes involved in this initiative could entail a significant tax increase for anyone whose car is an essential part of their job. Salesmen, engineers and delivery drivers are likely to the hardest hit.

But it's not all bad news -- drivers who receive a car as a perk are likely to see their tax bills decrease under the new system.

Until 5 April 2002, company cars will be taxed according to their business mileage. This will range from 35 per cent of the car's list price for those who drive less than 2,500 business miles a year, to 15 per cent of the list price for those who drive more than 18,000 business miles. The premise is that drivers who are given a car as a perk are taxed more heavily than those whose job involves a significant amount of business travel.

A major criticism of the old tax system has been that it encourages company car owners to drive more business miles than necessary simply to reach the threshold for a lower tax charge. It is estimated that employees travel up to 300 million extra miles each year to ensure that they take full advantage of the mileage discounts.

While still calculated as a percentage of list price, the new tax system is designed to encourage drivers to consider the environmental impact of their car. It will be introduced from 6 April 2002 and takes no account of business mileage, being based on the level of carbon dioxide a car emits, according to data provided by the manufacturer.

For the tax year 2002/03, any car emitting less than 165g of [CO.sub.2] per km will be taxed at 15 per cent of the list price. The charge is then increased by 1 per cent for each additional 5g, to a maximum of 35 per cent of the list price for cars emitting 265g of [CO.sub.2] and above. Diesel engines generally emit much lower amounts of [CO.sub.2] but higher levels of particulates and oxides of nitrogen, which are of even greater concern to environmentalists. Most diesel engine ears will therefore have a 3 per cent supplement over equivalent petrol models, but with the same maximum limit of 35 per cent.

This is just the start. For 2003/04, the minimum...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT