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Car trouble

Those of you who avidly read my blog (you really should get out more) may recall that in April 2012 I predicted that, as our cars were all becoming more environmentally friendly, the government would have to do something to keep up the levels of tax they receive from company car benefits.

The benefit rates for 2016-17 have been published and my crystal ball has been proved right.

If you bought a zero emission electric car in 2014 you would have paid zero tax on the benefit of having it as a company vehicle. In 2015-16 you would pay tax on a benefit equal to 5% of the list price, and in 2016-17 this goes up to 7%. Bearing in mind that these are generally not cheap cars for their size, even something like a Nissan Leaf will have a taxable benefit of around £1600.

For those of you who, like me, changed to low emission diesel cars, it is even worse. a diesel with 115g to119g CO2/KM emissions, which many mainstream models are, would have been in the 13% tax band for 2011/12. In the current year they are in the 21% band, a 61% tax increase in just 4 years.

It appears that the new pattern is to increase the charge on each emission band by 2% a year. (For the past five years it had only gone up 1% per year). As the tax seems to be increasing faster than manufacturers can improve their engines we appear to be back to the bad old days when it will no longer be worthwhile to have a company car.

Should you have fuel provided for a company car?
Unless you do massive amounts of private mileage, it is a non-starter. In 2015-16 the fuel benefit is £22,100 multiplied by the emissions band. Lets say you have a typical diesel car in the 21% band and you are a 40% taxpayer. You would have to use over £1850 of fuel privately to make it worthwhile for your employer to provide fuel. At 120p per litre and 50mpg, this equates to nearly 17000 miles in a year. Even a basic rate taxpayer would have to do nearly 8500 miles to benefit.

    | 25th May 2015, 11:17:38 | Posted by Kevin Gamble

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