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 below.

The car fuel benefit is calculated by applying the same percentages to the fuel multiplier, which for 2012/13 is £20,200.

For cars which cannot produce CO2 engine emissions under any circumstances when driven (‘zero emission cars’, including those powered solely by electricity), the appropriate percentage is reduced to 0%, thereby reducing the car benefit charge to nil.

For cars emitting between 1g/km and 75g/km the appropriate percentage is reduced to 5% (8% for diesel) for five years from 6 April 2010.

Changes from 2013/14

The lower threshold will be reduced from 120g/km to 115g/km. The lowest appropriate percentages will remain at 0% and 5%. The 10% rate will apply to cars with CO2 emissions of 76g/km to 94g/km. The appropriate percentage will increase by 1% for all vehicles with CO2 emissions between 95g/km and 215g/km, to a maximum of 35%.

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 on a scale charge.

The table shows the VAT chargeable for quarters commencing on or after 1 May 2012.

CO2 emissions
Appropriate
percentage
Quarterly VAT

(g/km)
Petrol
%
Diesel
%
Fuel scale charge £ VAT on charge 
£
Zero 0 0 166 27.67
Up to 75 5 8 166 27.67
76-99 10 13 166 27.67
100-104 11 14 166 27.67
105-109 12 15 166 27.67
110-114 13 16 166 27.67
115-119 14 17 166 27.67
120-124 15 18 166 27.67
125-129 16 19 250 41.67
130-134 17 20 266 44.33
135-139 18 21 283 47.17
140-144 19 22 300 50.00
145-149 20 23 316 52.67
150-154 21 24 333 55.50
155-159 22 25 350 58.33
160-164 23 26 366 61.00
165-169 24 27 383 63.83
170-174 25 28 400 66.67
175-179 26 29 416 69.33
180-184 27 30 433 72.17
185-189 28 31 450 75.00
190-194 29 32 467 77.83
195-199 30 33 483 80.50
200-204 31 34 500 83.33
205-209 32 35 517 86.17
210-214 33 35 533 88.83
215-219 34 35 550 91.67
220-224 35 35 567 94.50
225 and above 35 35 583 97.17

Plug-in grants

Motorists (private or business) purchasing a new qualifying ultra-low emission car can receive a grant of 25% towards the cost of the vehicle, up to a maximum of £5,000. The scheme has recently been extended to cover 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 75g/km or less, including electric, plug-in hybrid and hydrogen-fuelled cars, are all 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.

Mileage rates

Changes to the HMRC business mileage rates are announced from time to time. The rates at 6 April 2012 are as follows:

Vehicle First 10,000 miles Thereafter
Car / Van 45p 25p
Motorcycle 24p 24p
Bicycle 20p 20p

 

Car - fuel only advisory rates
Engine Capacity Petrol LPG
1400cc or less 15p 10p
1401 - 2000cc 18p 12p
Over 2000cc 26p 18p
Engine Capacity Diesel  
1600cc or less 13p  
1601 - 2000cc 15p  
Over 2000cc 19p  

 

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, with lower scale rates for cars using alternative fuels. The following table shows the rates which apply from 1 April 2012 for cars registered on or after 1 March 2001:

VED Band CO2 emissions (g/km) First year rate Standard rate
Petrol & Diesel Alternative fuels
A Up to 100 £0 £0 £0
B 101 – 110 £0 £20 £10
C 111 – 120 £0 £30 £20
D 121 – 130 £0 £100 £90
E 131 – 140 £120 £120 £110
F 141 – 150 £135 £135 £125
G 151 – 165 £170 £170 £160
H 166 – 175 £275 £195 £185
I 176 – 185 £325 £215 £205
J 186 – 200 £460 £250 £240
K* 201 – 225 £600 £270 £260
L 226 – 255 £815 £460 £450
M Over 255 £1,030 £475 £465
* includes cars emitting over 225g/km registered before  23 March 2006

Company vans

The taxable benefit for the unrestricted private use of vans is £3,000. There is a further £550 taxable benefit if the employer provides fuel for private travel.

Van and fuel charge Van Fuel Total
Tax (20% taxpayer) £600 £110 £710
Tax (40% taxpayer) £1,200 £220 £1,420
Tax (50% taxpayer) £1,500 £275 £1,775
Employer’s Class 1A NICs £414 £75.90 £489.90


The flat rate of £3,000 is reduced to nil for vans emitting zero CO2. There is no fuel benefit for such vans.