  
Company Cars
Car Benefits
Pending a change to a system of taxing company cars based on carbon dioxide emissions in 2002/03, the effective rates of taxable benefit remain as previously.
| Taxable Benefit |
Car under
4 years |
Car 4 years
or over |
|
| Standard taxable benefit |
35% |
26.25% |
| Business mileage 2,500 - 17,999 p.a. |
25% |
18.75% |
| Business mileage 18,000 and over |
15% |
11.25% |
|
Generally, second cars will be taxed on the standard 35 per cent benefit, with a reduction to 25 per cent if business travel in that car exceeds 17,999 miles a year.
| Tax tip |
| Plan your business trips to ensure your mileage exceeds the thresholds to reduce your taxable benefits. |
How will you be affected when the new system is introduced?
Under the current system, the benefit charged to tax is calculated by reference to a percentage of the car's list price, when new (including most accessories), with a system of discounts for higher annual business mileage and for older cars. Under the new system the taxable benefit will continue to be calculated as a percentage of list price, starting at 15% and increasing by reference to the car's carbon dioxide emissions.
The business mileage discounts and those for older cars are abolished with effect from 6 April 2002.
For 2002/03, the standard 15% rate applies for cars emitting up to 165 grams of carbon dioxide per kilometre and increases by a further 1% for every 5g/km of CO2 emitted, to a maximum of 35%. There is, in addition, a 3% supplement for diesel cars, recognising their higher emissions, but the maximum remains at 35%.
For 2003/04 the 15% rate applies for petrol cars with CO2 emissions of up to 155 g/km, 145 g/km for 2004/05.
| Typical taxable percentage rates - car emitting CO2 at 212 g/km |
| Year |
Petrol |
Diesel |
| 2002/03 |
24% |
27% |
| 2003/04 |
26% |
29% |
| 2004/05 |
28% |
31% |
Example
If you drive a six-month old company car, list price £20,000, on 10,000 business miles in 2001/02, your taxable benefit will be £20,000 x 25% = £5,000 and your tax bill, assuming you are a 40% tax payer, will be £2,000 - or £167 per month.
Company cars
If we assume your car emits CO2 at a typical rate of 202 grams per kilometre.
Your tax will be as follows:
| |
| |
%Taxable |
Benefit |
Tax @ 40% |
Tax per month |
| 2001/02 |
25 |
5,000 |
2,000 |
167 |
| 2002/03 |
22 |
4,400 |
1,760 |
147 |
| 2003/04 |
24 |
4,800 |
1,920 |
160 |
| 2004/05 |
26 |
5,200 |
2,080 |
173 |
The differential between the tax payable on your company car for 2001/02 and later years will be even more marked if your car has higher CO2 emissions. |
| Tax trap |
| It is possible that in 2004 you will still be driving the comapny car you choose today. Be aware of the impact of the new CO2 emissions based tax system. |
Car fuel benefits
Scale rates for 2001/02 are:
| Engine size |
Petrol |
Diesel |
|
| Up to 1400cc |
£1,930 |
£2,460 |
| 1401-2000cc |
£2,460 |
£2,460 |
| Over 2000cc |
£3,620 |
£3,620 |
|
Fixed profit car scheme
The rates for the maximumtax free mileage allowances under the FPCS for 2001/02 are as follows:
| Engine Capacity |
| Business |
Up to 1000cc |
1001cc to 1500cc |
1501cc to 2000cc |
Over 2000cc |
Alternative mileage average rate |
|
| First 4,000 miles |
40p |
40p |
45p |
63p |
42.5p |
| Over 4,000 miles |
25p |
25p |
25p |
36p |
25p |
|
Proposed rates from 6 April 2002 are 40p per mile for the first 10,000 miles and 25p per mile thereafter, regardless of engine capacity. |
VAT scale charge - VAT due per quarter per car
VAT scale rates for 2001/02 are as follows:
| Engine size |
Petrol |
Diesel |
|
| Up to 1400cc |
£36.04 |
£33.51 |
| 1401-2000cc |
£45.72 |
£33.51 |
| Over 2000cc |
£67.46 |
£42.59 |
|
|
