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* 28* 200 205 195 200 195 200 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 www.vcacarfueldata.org. 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%) uk/search. 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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