Tax Issues - Reform of Company Car Tax

Until 5 April 2002 | From 6 April 2002

New rules from 6 April 2002

From 6 April 2002, the charge on the benefit of a company car is to be graduated according to carbon dioxide (C02) emissions, and the reductions for business mileage (including those for second cars), and older cars will not apply.

Cars with an approved CO2 emissions figure
The charge will build up from 15% of the car's price, for cars emitting CO2 at or below a qualifying level, in 1% steps for every addtional 5 grams per kilometre (g/km) over that level. The maximum charge will be on 35% of the car's price. The qualifying level will gradually be reduced as cars get more fuel efficient. Details are given in the table overleaf together with some examples of how the scheme will work.

Cars with no approved CO2 emissions figure
Cars without an approved figue of CO2 emissions will be taxed according to engine size as follows:

Engine size	Percentrage of car's price on which tax will be charged
0 - 1,400cc	15%
1,401 - 2,000cc	25%
2,001cc+	35%

Diesel cars
Diesel cars will be subject to a 3% suppplement, but this will not take the maximum charge above 35%.

Older cars
Cars registered before 1 January 1998 will also be taxed according to engine size as follows:

Engine size	Percentrage of car's price on which tax will be charged
0 - 1,400cc	15%
1,401 - 2,000cc	22%
2,001cc+	32%

Cars with no recognised cylinder capacity
If a car has no approved figue of CO2 emissions and no cylinder capacity it will be taxed on 35% of the car's price (or 32% if the car was registered before 1 January 1998), unless it runs soleley on electricity, in which case the charge will be on 15% of the car's price.

Consultation
Following further consultation, details will be announced of a supplement waiver for very low emission diesel cars, and discounts for other environmentally friendly cars, such as those that run on electricity or a combination of petrol and gas or electricity. these discounts could reduce the charge below the usual minimum of 15% of the car's price.

Table 1: Ready Reckoner of car benefit charges in first three years of the reform.

Note: The exact CO2 figure is rounded down to the nearest 5 grams per kilometre (g/km).

Examples of new charge from April 2002

The examples below show how it is proposed to calculate a car benefit charge in 2002-2003.

Until 5 April 2002 | From 6 April 2002