Business Leasing: Taxation Advice
The source for accurate information on the latest car taxation issues.
The Chancellor's Budget in March 2000 announced major changes for almost all company car drivers. From April 2002 a new system of company car taxation based on CO2 emissions was introduced.
The following graduated scale of CO2 emission banding is applied to all cars from 6th April 2002
· 2002/3 165g/km
· 2003/4 155g/km
· 2004/5 145g/km
With effect from November 2000 the vehicle registration document for all vehicles states the CO2 emission rating for the vehicle. Under the new system, a charge of 15% is applied to the cars list price, applicable for cars with CO2 emissions of 165g/km on 2002/3. This is then reduced in each subsequent tax year by 10g/km (i.e. 155g/km in 2003/4 and 145g/km in 2004/5)
The scale charge is increased by 1% for additional 5g/km to a maximum of 35%. Diesel engined cars attract an additional 3% (making the minimum charge 18%) but cannot exceed the 35% upper limit. Further consultation is being sought over removing this surcharge for more environmentally friendly diesels.
There is an intention to produce special rules in future for vehicles using alternative fuels as well as older cars and grey imports where no CO2 data is currently available.
Company Car Taxation
Company Car Taxation Analysis
Analysis assumes the driver pays tax at the higher rate
of 40%
| Vehicle | List Price | CO2 Rating | < 2,500 miles | 2,500 - 18,000 miles | > 18,000 miles | New System 2002/3 | New System 2004/5 |
| Ford Focus 1.6 LX | £13,820 | 162 | £1,935 | £1,382 | £829 | £829 | £995 |
| Ford Mondeo 1.8 16V GLX | £16,820 | 175 | £2,355 | £1,682 | £1,009 | £1,144 | £1,413 |
| Vauxhall Vectra 1.8 Sri | £16,670 | 183 | £2,334 | £1,667 | £1,000 | £1,200 | £1,467 |
| BMW 3181 1.9 SE A/C | £20,990 | 188 | £2,939 | £2,099 | £1,259 | £1,595 | £1,931 |
| Mercedes C230 Elegance | £26,995 | 233 | £3,779 | £2,700 | £1,620 | £3,023 | £3,455 |
| Volvo S80 4 dr 2.8 T6 | £33,405 | 264 | £4,677 | £3,341 | £2,004 | £4,543 | £4,677 |
From the table above, it is clear that the majority of car drivers travelling less than 18,000 miles at present will, in many cases, pay less tax on their company car under the new system than they do today. In the above table, the exceptions are the Mercedes and Volvo vehicles which, in many fleets, are available for selection by senior management who traditionally represent the majority of low mileage 'perk' drivers.
