A company car benefit is taxed according to the price of the car multiplied by the ‘appropriate percentage’. This percentage is based on the car’s CO2 emissions (g/km) and is increased by 3% for diesel cars. Any contribution an employee makes for the use of the car is deducted from the car benefit charge.
The threshold percentage is increased by 1% for every 5g/km above the 75g/km limit, up to a maximum of 35%. For 2017/18 and 2018/19 , the appropriate percentage of list price subject to tax will increase by 2% for cars emitting more than 75g/km, to a maximum of 37%. These percentages are shown in the table below.
The taxable benefit for private use of a company van is £3,000 unless the private use is restricted to a minimum in which case the benefit is zero. The £3,000 charge will increase in line with inflation for 2015/16 based on the September RPI figure.
Where an employee/director is provided with a van for their private use that runs solely on electricity or which cannot produce CO2 under any circumstances when driven, this qualifies for a nil rate of income tax. The nil rate came into force on 6 April 2010 and was to apply until 2014/15. This will now be extended to 2019/20 for vans.
Changes will be made to ensure that payments for private use of a company car or van need to be made in the same tax year as the private use occurs, if they are to reduce the benefit charge.
An additional taxable charge is incurred if, in addition to being provided with a car or van, an employee is provided with fuel for private use. This charge will increase in line with inflation.
Table for Company Car Tax – Appropriate percentage for petrol cars.