Tax and Travel

Car benefit

The threshold CO₂ emissions rate remains at 140 g/km. The rate of the taxable benefit ranges from 15% to 35% of list price (plus certain accessories) for most petrol or diesel-powered cars.

You can find your taxable percentage of the list price for 2007/08 using the following table:

CO2 in g/km Taxable % CO2 in g/km Taxable % CO2 in g/km Taxable % Petrol Diesel Petrol Diesel Petrol Diesel Less than 145 15% 18% 175 to 179 22% 25% 210 to 214 29% 32% 145 to 149 16% 19% 180 to 184 23% 26% 215 to 219 30% 33% 150 to 154 17% 20% 185 to 189 24% 27% 220 to 224 31% 34% 155 to 159 18% 21% 190 to 194 25% 28% 225 to 229 32% 35% 160 to 164 19% 22% 195 to 199 26% 29% 230 to 234 33% 35% 165 to 169 20% 23% 200 to 204 27% 30% 235 to 239 34% 35% 170 to 174 21% 24% 205 to 209 28% 31% 240 and over 35% 35%

The diesel surcharge is waived for Euro IV compliant cars first registered no later than 31 December 2005.

The percentages above are reduced for lower emission vehicles by:

• 2% for bi-fuel lpg and petrol cars manufactured or converted before type approval
• 3% for hybrid electric and petrol cars
• 6% for electric-only cars.

It is also worth noting that while the costs of converting to bi-fuel lpg and petrol after type approval are excluded from the calculation of car benefit, there is no percentage discount for such cars, after 5 April 2006.

In addition, with effect from 2008/09, there will be a reduced taxable percentage rate of 10% for those cars with CO₂ emissions of 120 g/km or less and a 2% discount for cars manufactured to run on E85 fuel.

Car fuel benefit

The multiplier for car fuel benefit has not changed since the current scheme was introduced. It stands at £14,400.

Car and fuel benefit calculation

The amount chargeable to income tax (user) and Class 1A NICs (employer) for 2007/08 is calculated by multiplying list price (car benefit) or the fuel multiplier (fuel benefit) by a percentage based on the rate at which the car emits carbon dioxide (CO2, in g/km) (see table above).

Take a car with a list price of £18,000 when it was first registered (say 31 March 2007) and which emits carbon dioxide at a rate of 180 g/km.

Car Benefit Petrol Diesel List price £18,000 £18,000 Taxable percentage 23% 26% Taxable benefit £4,140 £4,680 Tax (22% taxpayer) £911 £1,030 Tax (40% taxpayer) £1,656 £1,872 Employer’s Class 1A NIC £530 £599 Fuel benefit Petrol Diesel Multiplier £14,400 £14,400 Taxable percentage 23% 26% Taxable benefit £3,312 £3,744 Tax (22% taxpayer) £729 £824 Tax (40% taxpayer) £1,325 £1,498 Employer’s Class 1A NIC £424 £479

VAT on fuel for private use in cars

Where businesses buy fuel which has some degree of private use, they must account for output VAT on a scale charge. This is based on the CO₂ emissions (rounded down to the next multiple of 5). The VAT chargeable for quarters commencing after 1 May 2007 is as follows:

CO2 in g/km VAT on charge CO2 in g/km VAT on charge CO2 in g/km VAT on charge Up to 140 £27.11 175 £39.91 210 £52.57 145 £29.04 180 £41.70 215 £54.36 150 £30.83 185 £43.49 220 £56.30 155 £32.62 190 £45.28 225 £58.09 160 £34.40 195 £47.21 230 £59.87 165 £36.19 200 £49.00 235 £61.66 170 £38.13 205 £50.79 240 and over £63.45

Mileage rates

Changes to the HM Revenue & Customs business mileage rates are announced from time to time.
The current rates are as follows:

Vehicle First 10,000 miles Thereafter Car / Van 40p 25p Motorcycle 24p 24p Bicycle 20p 20p

Car - fuel only advisory rates Engine Capacity Petrol Diesel Gas Up to 1400cc 9p 9p 6p 1401 - 2000cc 11p 9p 7p Over 2000cc 16p 12p 10p

The fuel only advisory rates can be applied as a tax-free maximum rate for employees claiming for petrol used on business journeys and for employees reimbursing their employers with the cost of petrol used for private journeys. HMRC will consider claims for a higher maximum rate, if it can be demonstrated that it is necessary for an employee to use a car with higher than average fuel costs.

Car costs – VED rates

Band CO2 emissions g/km Petrol & Diesel Alternative Fuel Cars A 100 and below £0 £0 B 101 - 120 £35 £15 C 121 - 150 £115 £95 D 151 - 165 £140 £120 E 166 - 185 £165 £145 F 186 - 225 £205 £190 G* 226 and above £300 £285

* Cars registered from 23 March 2006

Company vans

With effect from 6 April 2007, the taxable benefit for the unrestricted private use of vans will be £3,000. There is a further £500 taxable benefit if the employer provides fuel for private travel.

Van and fuel charge Van Fuel Total Tax (22% taxpayer) £660 £110 £770 Tax (40% taxpayer) £1,200 £200 £1,400 Employer’s class 1A NICs £384 £64 £448

Van drivers can avoid the new benefit in kind charge of £3000 per year, if they agree not to use the van for personal journeys. Driving to and from work is acceptable so long as there is a reasonable amount of business use. It is advisable to keep a regular check on the vehicle’s mileage to ensure the ‘only for business rule’ is kept to.