Company car tax rates

1. Company Car Tax Rates
Who is likely to be affected?
Businesses and employers that provide company cars and employees provided with
company cars that are made available for private use.
General description of the measure
For 2014-15, the measure increases the appropriate percentage of the list price subject to
tax by one percentage point for cars emitting more than 75g of carbon dioxide per kilometre,
to a maximum of 35 per cent.
Policy objective
The measure ensures that company car tax continues to reflect changes in fuel efficiency
and supports the sustainability of the public finances.
In addition, new European standards which come into force in September 2015 will require
diesel cars to have the same air quality emissions as petrol cars. The diesel supplement will
therefore be removed in April 2016.
Background to the measure
Company Car Tax rates have traditionally been announced around two years in advance, to
give certainty to industry. Finance Bill 2012 will legislate 2014-15 company car tax rates.
Detailed proposal
Operative date
This measure will take effect from 6 April 2014.
Current law
Sections 121 to 148 of the Income Tax (Earnings & Pensions) Act 2003 (ITEPA) provide for
calculating the cash equivalent of the benefit of a company car which is made available for
private use. In broad terms, this depends on the list price of the car multiplied by the level of
carbon dioxide emissions the car produces, which is expressed as the appropriate
percentage.
Proposed revisions
Legislation will be introduced in Finance Bill 2012 to increase by one percentage point, the
level of the appropriate percentage for company cars, to a maximum of 35 percent. This
excludes zero emission vehicles and vehicles emitting 75 grams or less carbon dioxide per
kilometre, which are subject to special rates in 2014-15.
Legislation will be introduced in a later Finance Bill to make the following changes:
In both 2015-16 and 2016-17, the appropriate percentages of the list price subject to tax will
increase by two percentage points, to a maximum of 37 per cent.
From April 2016, the Government will remove the 3 percentage point diesel supplement so
that diesel cars will be subject to the same level of tax as petrol cars.

2. From April 2015, the five year exemption for zero carbon and the lower rate for ultra low
carbon emission cars will come to an end as legislated in Finance Bill 2010. The appropriate
percentage for zero emission and all low carbon cars emitting less than 95g of carbon
dioxide per kilometre will be 13 per cent in 2015-16, and will increase by two percentage
points in 2016-17.
A full table of rates can be found in the 'Overview of Tax Legislation and Rates' document
that is published alongside the Budget.
Summary of impacts
Exchequer
impact (£m)
2012-13
2013-14
2014-15
2015-16
2016-17
+120
+375
+350
These figures are set out in Table 2.1 of Budget 2012 and have been
certified by the Office for Budget Responsibility. More details can be
found in the policy costings document published alongside Budget
2012.
Economic
impact
Increasing Company Car Tax will increase average income tax rates
for those who receive this benefit-in-kind. Since those affected are
predominantly higher income households the impact on consumption
and labour supply is expected to be relatively small.
Impact on
individuals and
households
On average this measure will give year on year increases in the tax
paid by an employee driving a petrol company car of £70 in 2014-15,
£165 in 2015-16 and £165 in 2016-17. An employee driving a diesel
company car will see average increases of £85 in 2014-15 and £190
in 2015-16, followed by a reduction of £85 in 2016-17.
A basic rate taxpayer driving a typical diesel fuelled car, such as a
Ford Focus, with a list price of £18,000 and CO2 emissions of 146g/km
will pay around £35 more in 2014-15, £70 more in 2015-16 and £35
less in 2016-17. A higher rate tax payer driving the same company car
will pay £70 more in 2014-15, £145 more in 2015-16 and £70 less in
2016-17.
A basic rate taxpayer driving a typical petrol fuelled Ford Focus with a
list price of £16,300 and CO2 emissions of 159g/km will pay around
£30 more in 2014-15, £65 more in 2015-16 and £65 more in 2016-17.
A higher rate tax payer driving the same company car will pay £65
more in 2014-15, £130 more in 2015-16 and £165 more in 2016-17.
Equalities
impacts
The changes apply equally to all company car drivers. There are no
particular impacts on people with protected characteristics.
Over 90 per cent of individuals receiving company cars have incomes
above the UK median income for taxpayers, and around 60 per cent
are higher or additional rate taxpayers.
Impact on
business
including civil
society
organisations
Operational
impact (£m)
(HMRC)
The measure is expected to have no impact on businesses (of all
sizes including small firms) or civil society organisations as employer
reporting and administration requirements will not change.
Routine IT and guidance changes required for HM Revenue &
Customs.

3. Other impacts
No other impacts have been identified.
Monitoring and evaluation
The measure will be kept under review through regular communication with affected
taxpayer groups.
Further advice
If you have any questions about this change, please contact Su McLean-Tooke on 020 7147
2665 (email: susan.mclean-tooke@hmrc.gsi.gov.uk).