Budget 2016: Company car tax

Company cars made available for private use give rise to a benefit in kind charge which, in broad terms, depends on the list price of the car (plus accessories) multiplied by the level of CO2 emissions the car produces, which is expressed as a fraction. Different rates apply depending on the age of the car and whether or not the car has a CO2 emissions figure.

Legislation will be introduced to make the following changes to company car rates for the three years to 2019/2020.

Cars with CO2 emissions – From 6 April 2019, the graduated table of company car tax bands will provide for a 16% band for cars with emissions of 0-50g CO2 per km, a 19% band for cars with emissions of 51-75g and a 22% band for cars with CO2 between 76g – 94g. There will be a 3% increase for each rise in emissions of 5g thereafter to a maximum of 37%.

Cars which have neither a CO2 emissions figure nor an engine cylinder capacity and cannot produce CO2 emission –From 6 April 2017, the appropriate percentage for cars will be set at 9%. This will increase to 13% from 6 April 2018 and to 16% from 6 April 2019.

Cars without CO2 emissions – From 6 April 2019, the appropriate percentage for the lowest band (cars up to 1,400cc), will be set at 23%. For cars in the medium band (cars 1,400cc – 2,000cc) the percentage will be set at 34% and for all other cars, the appropriate percentage will remain at 37%.

  • Cars registered before 1 January 1998 – From 6 April 2019, for cars with cylinder capacity of:
  • up to 1,400cc, the appropriate percentage will be set at 23%,
  • between 1,400cc and 2,000cc, the appropriate percentage will be set at 34% and
    above 2,000cc, the appropriate percentage will remain at 37%.

This measure is aimed at encouraging employers and employees to purchase ultra-low emission company cars. The changes demonstrate the range of tax rates and employers and employees would be advised to review their company car policies.