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Business leasing - taxation advice

The source for accurate information on the latest car taxation issues.

The Chancellor's Budget in March 2000 announced major changes for almost all company car drivers. From April 2002 a new system of company car taxation based on CO2 emissions was introduced.

The following graduated scale of CO2 emission banding is applied to all cars from 6th April 2002

With effect from November 2000 the vehicle registration document for all vehicles states the CO2 emission rating for the vehicle. Under the new system, a charge of 15% is applied to the cars list price, applicable for cars with CO2 emissions of 165g/km on 2002/3. This is then reduced in each subsequent tax year by 10g/km (i.e. 155g/km in 2003/4 and 145g/km in 2004/5)

The scale charge is increased by 1% for additional 5g/km to a maximum of 35%. Diesel engined cars attract an additional 3% (making the minimum charge 18%) but cannot exceed the 35% upper limit. Further consultation is being sought over removing this surcharge for more environmentally friendly diesels.

There is an intention to produce special rules in future for vehicles using alternative fuels as well as older cars and grey imports where no CO2 data is currently available.

Company Car Taxation

Company Car Taxation Analysis
Analysis assumes the driver pays tax at the higher rate of 40%

 
List
Price		 CO2
Rating		 <2,500
miles		 2,500-
18,000
miles		 >18,000
miles		 New
System
2002/3		 New
System
2004/5
Ford Focus 1.6 LX
£13,820 162 £1,935 £1,382 £829 £829 £995
Ford Mondeo 1.8 16V GLX
£16,820 175 £2,355 £1,682 £1,009 £1,144 £1,413
Vauxhall Vectra 1.8 Sri
£16,670 183 £2,334 £1,667 £1,000 £1,200 £1,467
BMW 3181 1.9 SE A/C
£20,990 188 £2,939 £2,099 £1,259 £1,595 £1,931
Mercedes C230 Elegance
£26,995 233 £3,779 £2,700 £1,620 £3,023 £3,455
Volvo S80 4 dr 2.8 T6
£33,405 264 £4,677 £3,341 £2,004 £4,543 £4,677
 
From the table above, it is clear that the majority of car drivers travelling less than 18,000 miles at present will, in many cases, pay less tax on their company car under the new system than they do today. In the above table, the exceptions are the Mercedes and Volvo vehicles which, in many fleets, are available for selection by senior management who traditionally represent the majority of low mileage 'perk' drivers.
 
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