Cars and Vans – Budget UpdateWednesday, March 21st, 2012
Employer provided cars
There are quite a few changes in the taxation of employer provided cars and the fuel benefit which applies if an employee does not pay for all of their private motoring.
The car benefit charge incurred by employees who have an employer provided car is based on the list price of the car multiplied by a percentage derived from the CO2 emission levels of the car and type of fuel that powers the car. We have already seen a steady increase in the rates at which employer provided cars are being taxed and we knew that there would be a further 1% increase in 2013/14.
So, what were the changes announced
- Car benefit –
- Legislation will be introduced in Finance Bill 2012 to increase the appropriate percentage for company cars emitting more than 75g of carbon dioxide per kilometer by one percentage point to a maximum of 35 per cent in 2014-15.
- What came as a surprise was the announcement that for both 2015/16 and 2016/17 there would be a 2% increase in each of those years moving the cap from 35% to 37% which is applied to the list price of the car.
- The good news is that the 3% surcharge applicable to diesel powered cars will be removed from April 2016 meaning that diesel powered cars will be taxed on exactly the same basis as petrol powered cars.
- 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.
- Fuel benefit – The fuel benefit charge applicable if employees do not pay for all of their private motoring increases from £18,800 to £20,200 for the tax year 2012-13. There is also a further commitment to increase the multiplier by two per cent above the rate of inflation (RPI) for the tax year 2013-14. As a result of this change the fuel benefit charge will increase for fuel provided for all cars apart from zero emissions cars.
Employer provided vans
The van fuel benefit charge multiplier will be frozen at £550 for 2012/13 but, will increase by inflation in 2013-14.