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									Company Car Tax in 2007/2008
    Company Car Tax and you
    Substantial rises in Vehicle Excise Duty for high-emitting cars,
    longer-term VED projections and a freeze on the company car tax
    lower threshold for qualifying cars in 2009/10 were among the
    announcements in Budget 2007.                                                                                                                                 Best Premium
                                                                                                                                                                 Lower Medium
                                                                                                                                                                   Car: Audi A3
                                                                                                                                                                Best Large SUV:
                                                                                                                                                                        Audi Q7

Key facts from Budget 2007
● Existing emissions-based company car tax rules           ● Nominal £5 VED rise for cars in Bands C-E in each        ● Extension of the 20p/litre biofuel duty incentive
  unchanged for 2007/8.                                      of the next three years; Band F rate to rise by £10 in     until 2009/10 and extension of the 40p/litre duty
● Minimum carbon dioxide emissions threshold                 2007/8, and £5 in each of the following two years.         incentive on biogas road fuels until 2011/12.
  frozen at the 2008/9 level of 135g/km for 2009/10.         Band B rate reduces by between £5-£15 in 2007/8.         ● 2% company car discount for drivers of cars using
● Vehicle Excise Duty for petrol and diesel cars in Band   ● Government set charge of £14,400 for fuel benefit           E85 high-blend bioethanol fuels from April 2008.
  G rises to £300 in 2007/8, and to £400 in 2008/9.          charge calculations maintained for 2007/8.               ● Fuel duty rise of 2p/litre deferred until October 1.
Company Car Tax in 2007/2008
Vehicle Excise Duty (VED)                                                                          Company car tax in 2007/8                                      Taxable percentages of P11D value
Budget 2007 applied increased rates for Bands C-G, and                                             Budget 2007 confirmed that the threshold for the minimum       % of P11D                    CO2 (g/km)            CO2 (g/km)            CO2 (g/km)
                                                                                                                                                                  price to be taxed             2007/8                2008/9                2009/10
reduced rates for cars in Band B. Petrol and diesel rates are                                      percentage charge rate for calculating Company Car Tax
                                                                                                                                                                  10*                               –                   120                   120
unified and apply from March 22, 2007.                                                             remains at 140g/km for 2007/8. In 2008/9, the lower
                                                                                                                                                                  15*                             140                   135                   135
  For the most polluting cars in Band G, the rate rises to £300                                    threshold reduces to 135g/km for qualifying cars and is        16*                             145                   140                   140
in 2007/8, and £400 in £2008/9. For cars in Band B, rates for                                      frozen at this level for 2009/10.                              17*                             150                   145                   145
petrol and diesel cars are reduced to £35, with rates for cars                                       2008/9 also introduces a new 10% tax band for company        18*                             155                   150                   150
running on ‘alternative’ fuels reduced to £15, with that rate                                      cars with CO2 emissions of 120g/km or less.                    19*                             160                   155                   155
then frozen for the next two years.                                                                  The chart (right) shows taxable percentages of P11D price    20*                             165                   160                   160
  Rates for all cars in Bands C-E, cars registered before 2001                                     applicable for 2007/8 and beyond (including the 10% rate).     21*                             170                   165                   165
and all LCVs will rise by £5 per year in each of the next three                                                                                                   22*                             175                   170                   170
years, while the rate for cars in Band F will rise by £10 in                                                                                                      23*                             180                   175                   175
                                                                                                                                                                  24*                             185                   180                   180
2007/8, and by £5 in each of the subsequent two years.
                                                                                                                                                                  25*                             190                   185                   185
                                                                                                                                                                  26*                             195                   190                   190

VED Bands and rates in 2007/8: cars                                                                                                                               27*
VED                      CO2      Alternative                       Petrol                Diesel                                                                  29*                             210                   205                   205
band                  emissions    fuel cars                         cars                  cars                                                                   30*                             215                   210                   210
A                   Up to 100g/km      £0                             £0                    £0                                                                    31*                             220                   215                   215
B                   101 – 120g/km     £15                            £35                   £35                                                                    32*                             225                   220                   220
C                   121 – 150g/km     £95                           £115                  £115                                                                    33**                            230                   225                   225
D                   151 – 165g/km    £120                           £140                  £140                                                                    34***                           235                   230                   230
E                   166 – 185g/km    £145                           £165                  £165                                                                    35****                          240                   235                   235
F                   Over 185g/km     £190                           £205                  £205                                                                    Add 3% for diesel. ** Add 2% for diesel. *** Add 1% for diesel. **** Max charge, so no supplement
G*                  Over 225g/km     £285                           £300                  £300
Annual VED payable from March 22, 2007. *Applies to new cars registered from March 23, 2006
                                                                                                   Company car tax: calculating your
                                                                                                   Benefit in Kind liability in 2006/7                           Company car tax liabilities:
Calculation of employers’ Class 1A                                                                 As in 2006/7, the method of calculating your company car      Audi A4 2.0 TDI SE and rivals
National Insurance Contributions                                                                   tax bill in 2007/8 depends on the car’s P11D price and CO2
                                                                                                                                                                 Model                 Audi A4                         BMW         Mercedes-Benz
                                                                                                   emissions, and whether or not it is a diesel.                                      2.0 TDI SE                      320d SE    C200 CDI Elegance SE
For 2007/8 the percentage for the calculation of employers’                                           Emissions figures and environmental compliance status      P11D price            £22,552                        £25,092          £24,847
Class 1A National Insurance Contributions (NICs) on company                                        can be obtained from manufacturer information or the          CO2 emissions (g/km)    159                            153              160
cars remains as for 2006/7 at 12.8% of taxable value.                                              Vehicle Certification Agency at       Taxable value          £4,736                         £4,962           £4,969
   To calculate the annual Class 1A NICs due, you need to know                                                                                                   (2007/8)               (21%)                          (20%)            (22%)
                                                                                                                                                                 BIK tax (2007/8)   £1,042/£1,894                  £1,104/£2,007    £1,093/£1,988
the car’s taxable value, derived from multiplying the P11D price                                      All diesel cars registered on or after January 1, 2006,    All models four-door. Source: manufacturer data
by the relevant BIK tax percentage (see chart above right). This                                   are liable to a 3% charge on account of diesel’s higher
is then multiplied by 12.8% to give the annual tax due.                                            emissions of ‘local’ pollutants.
                                                                                                      In 2007/8 a new Audi A3 Sportback 2.0 TDI SE (above),      ‘Free’ fuel:
Biofuels                                                                                           for example, with a P11D price of £20,667 and CO2             2007/8 emissions-based charge
                                                                                                   emissions of 146g/km, will attract a tax charge of 19% of     For example, a petrol car has CO2 emissions of 140g/km.
Budget 2007 announced the extension of the 20p/litre biofuel                                       its P11D value.                                               Percentage used to calculate the company car fuel tax charge for 2007/8 is 15%.
duty incentive until 2009/10, and the extension of the 40p/litre                                      Thus £20,667 x 19% gives a taxable value of £3,927,        Using the Government’s set figure of £14,400 for 2007/8, the fuel scale charge is
duty incentive on biogas road fuels until 2011/12. The Budget                                      equating to a yearly tax bill of £864 (£72 per month) for     calculated as follows: £14,400 x 15% = £2,160.
also announced a 2% company car tax discount for drivers of                                        a 22% tax payer or £1,571 (£131 per month) for a 40%          Therefore, a 22% tax payer will pay £2,160 x 22% = £475; a 40% tax payer will pay
vehicles using E85 high-blend biothanol fuels from April 2008.                                     tax payer.                                                    £2,160 x 40% = £864.
Company Car Tax in 2007/2008
Employer-provided ‘free’ fuel for                                                     Business mileage in a private car:                                                                 Calculating your tax code
private mileage: benefit or liability?                                                 reimbursement rates in 2007/8                                                                      Taking the Audi A4 2.0 TDI SE as an example, this model
For 2007/8, the Government set figure for calculating the tax due                      The 2007/8 Tax and National Insurance-exempted amounts                                             has a P11D price of £22,552 and CO2 emissions of 159g/km,
on employer-provided fuel for private use in a company car fuel                       claimable under the HM Revenue & Customs Authorised                                                giving a sliding scale tax percentage of 21% in 2007/8. The
is frozen at £14,400. To calculate the tax, you need to know:                         Mileage Allowance Payments (AMAPs) for business mileage                                            taxable value is therefore £22,552 x 21% = £4,736.
l The car’s combined consumption and BIK tax percentage                               in a private car remain the same as for 2006/7 (see below).                                          In this case, this is the value that should appear as the tax-
l The price of fuel used                                                                If your employer reimburses you at a lower rate than                                             free amount for company car benefit on your HM Revenue
l The driver’s marginal tax rate and Government set figure                             the AMAP rates, you are entitled to claim tax relief on the                                        & Customs PAYE Coding Notice. It is subtracted from your
                                                                                      difference. Conversely, reimbursements made at a higher                                            allowances to calculate your tax code.
For example, the Audi A4 Avant 2.0 TFSI S line Special Edition                        level than the AMAPs will incur tax.                                                                 Usually, the amount is accompanied by an explanatory
5dr (pictured below), with CO2 emissions of 186g/km, has a                              Budget 2006 stated that HM Revenue & Customs will                                                note on the reverse of the document which explains how
taxable percentage of 24% in the 2007/8 tax year. Therefore, the                      review taxation of employee car ownership schemes                                                  the coding has been derived: you can check this against
fuel scale charge is £14,400 x 24% = £3,456.                                          (ECOS), including AMAP rates, with a view to possible                                              your own calculation using the guidance above.
  For a 22% tax payer accepting employer-provided ‘free’ fuel                         changes. However, an announcement on this has been                                                   It equates to actual annual BIK tax payable in 2007/8 of
for private use, the annual tax liability will be £3,456 x 22% =                      deferred until later in 2007.                                                                      £1,042 (22% tax payer), or £1,894 for a 40% tax payer.
£760; for a 40% tax payer the liability is £3,456 x 40% = £1,382.
  £760 would buy 190 gallons of unleaded, assuming a price of
£3.99/gallon (87.7p/litre), or 346 gallons for a 40% tax payer.                        Authorised Mileage Allowance
With the A4’s combined consumption of 36.2mpg, a 22% tax                               Payments (AMAP) rates 2007/8
payer would need to cover 6,878 private miles a year to break                                                          Up to                          Over 10,000
even on the tax charge (or 12,525 miles for a 40% tax payer).                                                       10,000 miles                        miles
  If the number of private miles you cover is less than the                            All cars                         40p                              25p
calculated figure, consider paying for private fuel yourself as it may
cost less than the tax you pay. If your private mileage exceeds the
calculated figure, you may be better off paying the tax.                              Checking your company
                                                                                      car tax liability in 2006/7
                                                                                      The emissions-based company car tax may give rise to
                                                                                      inaccuracies in the Pay As You Earn (PAYE) tax codes                                                 What you should do if your PAYE
                                                                                      allocated to company car drivers, particularly with respect
                                                                                      to diesel models registered after January 1, 2006, which
                                                                                                                                                                                           coding notice is wrong
                                                                                      are subject to a 3% extra charge.                                                                    Look at the example above. If you think the value
                                                                                        It means some drivers may receive incorrect BIK tax                                                entered on your PAYE Coding Notice is wrong, you
                                                                                      bills for 2007/8. Mistakes on your Inland Revenue PAYE                                               should call your tax office on the number shown at the
Calculating your break-even mileage                                                   Coding Notice could mean you will pay the wrong tax –                                                top of the Coding Notice. Explain why you think it is
for employer-provided ‘free’ fuel                                                     either too much or too little – under the 2007/8 company                                             wrong, giving the correct P11D price and CO2 details for
                                                                                      car tax rules. Pay too much and you could be entitled to a                                           your car if needed. You will need to supply:
Example: Audi A4 Avant 2.0 TFSI S line Special Edition with combined fuel
consumption of 36.2mpg and CO2 emissions of 186g/km. Government set figure             rebate at a later date; pay too little and you may receive a                                         l The P11D price at first registration.
for 2006/7 = £14,400.                                                                 tax demand at a later date.                                                                          l The car’s CO2 emissions.
● Tax percentage is 24%, so fuel scale charge for 2006/7 is £14,400 x 24% = £3,456,     Simple checks of your PAYE Coding Notice will help you                                             l If the car in question is a diesel.
equating to £760 tax liability for a 22% tax payer (or £1,382 for a 40% tax payer).   ensure you pay the right company car tax.
● £760 will pay for 190 gallons of unleaded (or 346 gallons for a 40% tax payer),
assuming the national average price of £3.99/gallon or 87.7p/litre.
                                                                                      Official fuel consumption for the Audi models featured in mpg (litres/100km). A3/A3 Sportback: urban 19.2-42.8 (14.7-6.6); extra urban 34.9-67.3 (8.1-4.2); combined 26.9-55.4 (10.5-5.1). CO2 :
● Break-even mileage is 190 x 36.2 = 6,878 private miles (or 12,525 private miles
                                                                                      135-250g/km. A4/A4 Avant: urban 14.4-36.2 (19.6-7.8); extra urban 28.8-62.8 (9.8-4.5); combined 21.1-49.6 (13.4-5.7). CO2 : 152-322g/km. The explanations and data set out in this leaflet are for
for a 40% tax payer).                                                                 general information only, and though given in good faith, are given without any warranty as to their accuracy. Please refer to your legal or tax adviser for individual professional advice.

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