2011-12 company car tax
Changes to UK company car tax rules from 6 April 2011 are set to give drivers of very expensive vehicles a nasty shock. That’s because the current £80,000 cost limit which is applied for the purposes of calculating the taxable benefit is to be scrapped.
The underlying principle for working out how much goes to the tax man remains unchanged, so the on-the-road list price in force the day before the car was registered is multiplied by a percentage, which depends on the car’s CO2 emissions. This gives a figure that’s then multiplied by the employee’s tax rate.
Take for example the Mercedes-Benz S 65 AMG, which has a list price of £163,580. It emits 334 g/km of CO2, meaning that the percentage applied is the maximum 35%. For someone who pays tax at the higher rate of 40%, their 2010-11 company car tax liability would be:
· £80,000 x 35% x 40% = £11,200
However, for the 2011-12 tax year, the removal of the £80,000 list price upper limit will mean their tax bill more than doubles:
· £163,580 x 35% x 40% = £22,901
Admittedly this measure is going to affect very few people, particularly as those in a position to drive cars such as the S 65 AMG probably already do so in a much more tax efficient way.
However, three other changes for 2011-12 will hit company car drivers at the other end of the spectrum, too:
The underlying principle for working out how much goes to the tax man remains unchanged, so the on-the-road list price in force the day before the car was registered is multiplied by a percentage, which depends on the car’s CO2 emissions. This gives a figure that’s then multiplied by the employee’s tax rate.
Take for example the Mercedes-Benz S 65 AMG, which has a list price of £163,580. It emits 334 g/km of CO2, meaning that the percentage applied is the maximum 35%. For someone who pays tax at the higher rate of 40%, their 2010-11 company car tax liability would be:
· £80,000 x 35% x 40% = £11,200
However, for the 2011-12 tax year, the removal of the £80,000 list price upper limit will mean their tax bill more than doubles:
· £163,580 x 35% x 40% = £22,901
Admittedly this measure is going to affect very few people, particularly as those in a position to drive cars such as the S 65 AMG probably already do so in a much more tax efficient way.
However, three other changes for 2011-12 will hit company car drivers at the other end of the spectrum, too:
- The lowest percentage that can be applied to petrol- or diesel-powered models is 15%. In order to qualify for this in 2011-12, a car must achieve CO2 emissions of less than 125 g/km, which is down from the 2010-11 threshold of 130 g/km. This decrease means that drivers of cars such as the Ford Fiesta 1.25 Duratec (127 g/km or 129 g/km, depending on power output), Mini Cooper Hatch (127 g/km), Citroën C3 1.4 VTi 95hp EGS6 (127 g/km), Volkswagen Polo 1.2 petrol (128 g/km) and Fiat Punto Evo 1.4 16v MultiAir Turbo 135 (129 g/km) will end up paying more tax.
- There’s also bad news for those with alternative fuel vehicles. The 3% reduction for hybrid electric cars is going, as is the 2% reduction for gas only and E85 petrol / bioethanol bi-fuel vehicles.
- The 3% diesel surcharge will apply to all diesels, following the cessation of an exemption previously granted to Euro IV-compliant cars registered before 1 January 2006.
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