Tax and Travel

Car benefit

The threshold CO₂ emissions rate remains at 140 g/km. The rate of the taxable benefit ranges from 15% to 35% of list price (plus certain accessories) for most petrol or diesel-powered cars.

You can find your taxable percentage of the list price for 2007/08 using the following table:

CO₂ in g/km	Taxable %		CO₂ in g/km	Taxable %		CO₂ in g/km	Taxable %
CO₂ in g/km	Petrol	Diesel	CO₂ in g/km	Petrol	Diesel	CO₂ in g/km	Petrol	Diesel
Less than 145	15%	18%	175 to 179	22%	25%	210 to 214	29%	32%
145 to 149	16%	19%	180 to 184	23%	26%	215 to 219	30%	33%
150 to 154	17%	20%	185 to 189	24%	27%	220 to 224	31%	34%
155 to 159	18%	21%	190 to 194	25%	28%	225 to 229	32%	35%
160 to 164	19%	22%	195 to 199	26%	29%	230 to 234	33%	35%
165 to 169	20%	23%	200 to 204	27%	30%	235 to 239	34%	35%
170 to 174	21%	24%	205 to 209	28%	31%	240 and over	35%	35%

The diesel surcharge is waived for Euro IV compliant cars first registered no later than 31 December 2005.

The percentages above are reduced for lower emission vehicles by:

2% for bi-fuel lpg and petrol cars manufactured or converted before type approval
3% for hybrid electric and petrol cars
6% for electric-only cars.

It is also worth noting that while the costs of converting to bi-fuel lpg and petrol after type approval are excluded from the calculation of car benefit, there is no percentage discount for such cars, after 5 April 2006.

In addition, with effect from 2008/09, there will be a reduced taxable percentage rate of 10% for those cars with CO₂ emissions of 120 g/km or less and a 2% discount for cars manufactured to run on E85 fuel.

Car fuel benefit

The multiplier for car fuel benefit has not changed since the current scheme was introduced. It stands at £14,400.

Car and fuel benefit calculation

The amount chargeable to income tax (user) and Class 1A NICs (employer) for 2007/08 is calculated by multiplying list price (car benefit) or the fuel multiplier (fuel benefit) by a percentage based on the rate at which the car emits carbon dioxide (CO2, in g/km) (see table above).

Take a car with a list price of £18,000 when it was first registered (say 31 March 2007) and which emits carbon dioxide at a rate of 180 g/km.

Car Benefit	Petrol	Diesel
List price	£18,000	£18,000
Taxable percentage	23%	26%
Taxable benefit	£4,140	£4,680
Tax (22% taxpayer)	£911	£1,030
Tax (40% taxpayer)	£1,656	£1,872
Employer’s Class 1A NIC	£530	£599
Fuel benefit	Petrol	Diesel
Multiplier	£14,400	£14,400
Taxable percentage	23%	26%
Taxable benefit	£3,312	£3,744
Tax (22% taxpayer)	£729	£824
Tax (40% taxpayer)	£1,325	£1,498
Employer’s Class 1A NIC	£424	£479

VAT on fuel for private use in cars

Where businesses buy fuel which has some degree of private use, they must account for output VAT on a scale charge. This is based on the CO₂ emissions (rounded down to the next multiple of 5). The VAT chargeable for quarters commencing after 1 May 2007 is as follows:

CO₂ in g/km	VAT on charge	CO₂ in g/km	VAT on charge	CO₂ in g/km	VAT on charge
Up to 140	£27.11	175	£39.91	210	£52.57
145	£29.04	180	£41.70	215	£54.36
150	£30.83	185	£43.49	220	£56.30
155	£32.62	190	£45.28	225	£58.09
160	£34.40	195	£47.21	230	£59.87
165	£36.19	200	£49.00	235	£61.66
170	£38.13	205	£50.79	240 and over	£63.45

Mileage rates

Changes to the HM Revenue & Customs business mileage rates are announced from time to time.
The current rates are as follows:

Vehicle	First 10,000 miles	Thereafter
Car / Van	40p	25p
Motorcycle	24p	24p
Bicycle	20p	20p

Car - fuel only advisory rates
Engine Capacity	Petrol	Diesel	Gas
Up to 1400cc	9p	9p	6p
1401 - 2000cc	11p	9p	7p
Over 2000cc	16p	12p	10p

The fuel only advisory rates 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 – VED rates

Band	CO₂ emissions g/km	Petrol & Diesel	Alternative Fuel Cars
A	100 and below	£0	£0
B	101 - 120	£35	£15
C	121 - 150	£115	£95
D	151 - 165	£140	£120
E	166 - 185	£165	£145
F	186 - 225	£205	£190
G*	226 and above	£300	£285

* Cars registered from 23 March 2006

Company vans

With effect from 6 April 2007, the taxable benefit for the unrestricted private use of vans will be £3,000. There is a further £500 taxable benefit if the employer provides fuel for private travel.

Van and fuel charge	Van	Fuel	Total
Tax (22% taxpayer)	£660	£110	£770
Tax (40% taxpayer)	£1,200	£200	£1,400
Employer’s class 1A NICs	£384	£64	£448

Van drivers can avoid the new benefit in kind charge of £3000 per year, if they agree not to use the van for personal journeys. Driving to and from work is acceptable so long as there is a reasonable amount of business use. It is advisable to keep a regular check on the vehicle’s mileage to ensure the ‘only for business rule’ is kept to.