Tax and Travel – Budget Report 16 March 2016
Tax and Travel
Car and fuel benefits
The taxable petrol and diesel car benefit is based on the car’s CO2 emissions. It is calculated using the car’s UK list price and applying the ‘appropriate percentage’, as shown in the table on the right. The car fuel benefit is calculated by applying the same percentages to the fuel benefit charge multiplier, which for 2016/17 is £22,200.
From April 2015, the five year exemption for zero carbon and the lower rate for ultra-low carbon emission cars came to an end. Two new bands were introduced for ultra-low emission vehicles (ULEVs). These were set at 0-50 g/km (5%) and 51-75 g/km (9%).
The appropriate percentages for the remaining bands were increased by 2% for cars emitting more than 75 g/km, to a new maximum of 37%.
From April 2016, all the appropriate percentages will be increased by 2%, up to the maximum of 37%. In addition, new European standards which came into force in September 2015 required diesel cars to have the same air quality emissions as petrol cars. The 3% diesel supplement was set to be removed in April 2016. However, it will now be retained until April 2021, when EU-wide testing procedures will ensure new diesel cars meet air quality standards even under strict real-world driving conditions.
The appropriate percentage will increase by 2% for cars emitting more than 75 g/km to a maximum of 37% in each of years 2017/18 and 2018/19.
|0 – 50||7||10|
|51 – 75||11||14|
|76 – 94||15||18|
|95 – 99||16||19|
|100 – 104||17||20|
|105 – 109||18||21|
|110 – 114||19||22|
|115 – 119||20||23|
|120 – 124||21||24|
|125 – 129||22||25|
|130 – 134||23||26|
|135 – 139||24||27|
|140 – 144||25||28|
|145 – 149||26||29|
|150 – 154||27||30|
|155 – 159||28||31|
|160 – 164||29||32|
|165 – 169||30||33|
|170 – 174||31||34|
|175 – 179||32||35|
|180 – 184||33||36|
|185 – 189||34||37|
|190 – 194||35|
|195 – 199||36|
|200 and above||37|
VAT on fuel for private use in cars
Where businesses wish to reclaim the input VAT on fuel which has some degree of private use, they must account for output VAT for which they may use the flat rate valuation charge.
Motorists (private or business) purchasing new qualifying ultra-low emission cars can receive a grant of 35% towards the cost of the vehicle, up to a maximum of either £2,500 or £4,500 depending on the model. The scheme also covers new qualifying ultra-low emission vans, where the available grant will be 20% towards the cost of the vehicle, up to a maximum of £8,000. Vehicles with CO2 emissions of 75 g/km or less, including electric, plug-in hybrid and hydrogen-fuelled cars, are potentially eligible for the subsidy. There are strict criteria to be met before specific vehicles can be confirmed as eligible under the rules of the scheme.
Zero emission vans
As previously announced, the benefit for zero emission vans is to be increased on a tapered basis so that there will be a single van benefit charge applying to all vans by April 2020. For 2016/17 the charge will be 20% of the value of the standard van benefit charge (i.e. £634). There is no fuel benefit for such vans, as set out below.
The taxable benefit for the unrestricted private use of vans is £3,170. There is a further £598 taxable benefit if the employer provides fuel for private travel.
|Van and fuel charge||Van||Fuel||Total|
|Tax (20% taxpayer)||£634||£119.60||£753.60|
|Tax (40% taxpayer)||£1,268||£239.20||£1,507.20|
|Tax (45% taxpayer)||£1,426.50||£269.10||£1,695.60|
|Employer’s Class 1A NICs||£437.46||£82.52||£519.98|
Changes to the HMRC business mileage rates are announced from time to time. The rates from 1 March 2016 are as follows:
|Vehicle||First 10,000 miles||Thereafter|
|Car / Van||45p||25p|
|Car – fuel only advisory rates|
|1400cc or less||10p||8p||7p|
|1401cc to 1600cc||12p||8p||8p|
|1601cc to 2000cc||12p||10p||8p|
The fuel only advisory rates relate to company cars only. They can be applied as a tax-free maximum rate for employees claiming for petrol used on business journeys and for employees reimbursing their employers with the cost of petrol used for private journeys. HMRC will consider claims for a higher maximum rate, if it can be demonstrated that it is necessary for an employee to use a car with higher than average fuel costs.
Car costs – Vehicle Excise Duty (VED) rates
VED (‘Car Tax’) rates also reflect emissions. The following table shows the standard rates which apply from 1 April 2016 for cars registered on or after 1 March 2001:
|VED Band||CO2 emissions (g/km)||Standard rate||First Year Rate|
|A||Up to 100||£0||£0|
|B||101 – 110||£20||£0|
|C||111 – 120||£30||£0|
|D||121 – 130||£110||£0|
|E||131 – 140||£130||£130|
|F||141 – 150||£145||£145|
|G||151 – 165||£185||£185|
|H||166 – 175||£210||£300|
|I||176 – 185||£230||£355|
|J||186 – 200||£270||£500|
|K*||201 – 225||£295||£650|
|L||226 – 255||£500||£885|
|* includes cars emitting over 225g/km registered before 23 March 2006|