Tax Issues - Reform of Company Car Tax
 March
2000 Budget
In this March 2000 budget, the Chancellor announced details
of a major reform of company car tax. From april 2002, cleaner,
more fuel efficient cars will be rewarded by linking the tax
charge to the car's exhaust emissions. this leaflet explains
how your car benefit is calculated now, and how it is proposed
to calculate it from April 2002.
Existing rules applying until 5 April 2002
The exitising tax charge on a company car is based on the
following percentages of the price of the car for tax purposes:
- 35% for annual business mileage less than 2,500 miles
- 25% for annual business mileage of 2,500 to 17,999 miles
- 25% for annual business mileage of 2,500 to 17,999 miles
Older car discounts
For a car 4 or more years old at the end of the tax year, the
car benefit charge for the appropriate mileage band is further
reduced by one quarter.
Second cars
The tax charge on second cars is generally on 35% of the price
of the car. Where, exceptionally, the second car is also used
for at least 18,000 business miles in the year, the charge
is 25% of the price of the car.
Price of a car for tax purposes
The price of a car for tax purposes is the same under both
the old and new schemes. Your employer should normally be
able to tell you what this is. For more detailed information
about the price of a car for tax purposes ask your Inland
Revenue office for leaflet IR172, Income tax and company
cars: A short guide to the taxation of company cars
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