17 March 2004 Budget Report Budget highlights Capital taxes Duties Value added tax National insurance 2004/05 tax calendar Business tax and investment incentives Income tax and personal savings Pensions Company cars Other measures announced

The tax payable on your company car is governed by four factors:

• the list price of the car, on the day before it was first registered, plus certain accessories,
  
  
• the rate at which the car emits carbon dioxide (CO₂),
  
  
• the fuel type,
  (for most types of car, this is all the information you need to work out the taxable benefit)
  
  
• your highest rate of income tax.
  
  

You can find your taxable percentage of the list price for 2004/05 using the following table:

The 15% rate for petrol and 18% rate for diesels will apply for cars with CO₂ emissions of less than 145 g/km for 2005/06 and 2006/07.

Discounts apply for 'greener' cars. Ask us for details of your options.

How to find out how much CO₂ your company car emits – see:

Reliable emissions data is not widely available for cars registered before 1 January 1998. For them, the following taxable percentages of the list price apply, regardless of fuel type:

From 6 April 2004, there will be no tax or NIC charge on fire, police or ambulance workers who have to take their emergency vehicles home when on call.

Starting from the emissions-based taxable benefit rate (15% or more – see the table), the taxable benefit is then discounted by:

• cars running on electricity only, 6% (so, emissions being zero, the percentage of list price chargeable to tax is 9%),
  
  
• for petrol/battery hybrids, 2% plus a further 1% for each 20g/km by which the CO2 emissions are less than 150,
  
  
• for diesels meeting Euro IV standards, 3% (that is, the 3% diesel supplement is waived for these cars)
  
  
• for cars running on gas, 1%, plus a further 1% for each 20g/km by which the CO2 emissions are less than 150,
  
  
• for gas/petrol hybrids the discount varies – the discount is as for cars running on gas, alone, if the car was built after 31 December 1999 to run on both petrol and gas; for cars registered before1 January 2000, the discount will be calculated by first taking the petrol emissions rate, then discounting by 1%, then ignoring any premium charged by the manufacturer over the equivalent petrol model; for cars converted from petrol to petrol/gas hybrid running, the petrol rate is discounted by 1% and the conversion costs are ignored.

With effect from 6 April 2005, there will be no taxable benefit for employees who have to take their van home, but who are not allowed any other private use. The current taxable benefit will otherwise continue (£500/£350) until 5 April 2007. From 6 April 2007, the taxable benefit for company vans with no restrictions on private use will increase to £3,000, with no reduction for older vans, and there will be an additional £500 taxable benefit for fuel for private mileage, if applicable.

The Inland Revenue advisory rates can be applied as a tax-free maximum rate for employees claiming for petrol used on business journeys and for employees re-imbursing their employers with the cost of petrol used for private journeys. The Inland Revenue 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.

If the employee pays for the full cost of all fuel for private journeys (usually including home to work) there will be no car fuel benefit. In all other cases the full tax charge will be due.

The taxable car fuel benefit for 2004/05 is calculated by multiplying £14,400 by the same percentage as applies (or would apply) for the car benefit.

Example: A company car driver has a car which, on the day before it was first registered, had a list price of £18,000. It runs on petrol, and emits 182 g/km of CO₂.

If we assume the driver pays tax at 40%, the annual tax bill on the car is: £18,000 x 22% x 40% = £1,584

If the employer provides any fuel used for private journeys and is not re-imbursed for the cost, the 2004/05 tax bill for the fuel is: £14,400 x 22% x 40% = £1,267.20

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