Business Car Lease Tax Advice

Business Leasing: Company Car 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.

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