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 first two lines of figures in the table relate to qualifying low emissions cars (QUALECs).

The car fuel benefit is calculated by applying the same percentages to the fuel multiplier, which for 2010/11 increases from £16,900 to £18,000.

The percentages are reduced for cars (except QUALECs) that can be driven on alternative fuels by:

  • 2% for cars manufactured to be capable of being run on E85 fuel
  • 2% for bi-fuel cars or those which run on LPG only
  • 3% for hybrid electric and petrol cars.

For cars which cannot produce CO2 engine emissions under any circumstances when driven, the appropriate percentage is reduced to 0%, thereby reducing the car benefit charge to nil.

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

Future changes

With effect from 6 April 2011, the list price cap of £80,000 is being withdrawn. This will increase substantially the tax charge for drivers of very expensive cars. For example for a car with a list price of £170,000 and CO2 emissions of 320g/km, the annual taxable benefit will increase from £28,000 to £59,500.

For each of the two next tax years, the CO2 emissions thresholds will be shifted down by 5g/km and from 6 April 2012 the table of tax bands will be extended down to a new 10% band for cars emitting up to 99g/km. This will replace the existing 10% band, so that QUALECs will no longer exist as a separate category.

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 2010. The last column takes account of the change in the standard rate of VAT from 17.5% to 20% with effect from 4 January 2011.

CO2 emissions
(g/km)
Appropriate percentage Quarterly VAT
    Fuel scale charge £ VAT on charge 
Petrol % Diesel % £ (17.5%) £ (20%)
Up to 75 5 8 141 21.00 23.50
76 - 120 10 13 141 21.00 23.50
121 - 134 15 18 212 31.57 35.33
135 - 139 16 19 227 33.80 37.83
140 - 144 17 20 241 35.89 40.17
145 - 149 18 21 255 37.97 42.50
150 - 154 19 22 269 40.06 44.83
155 - 159 20 23 283 42.14 47.17
160 - 164 21 24 297 44.23 49.50
165 - 169 22 25 312 46.46 52.00
170 - 174 23 26 326 48.55 54.33
175 - 179 24 27 340 50.63 56.67
180 - 184 25 28 354 52.72 59.00
185 - 189 26 29 368 54.80 61.33
190 - 194 27 30 383 57.04 63.83
195 - 199 28 31 397 59.12 66.17
200 - 204 29 32 411 61.21 68.50
205 - 209 30 33 425 63.29 70.83
210 - 214 31 34 439 65.38 73.17
215 - 219 32 35 454 67.61 75.67
220 - 224 33 35 468 69.70 78.00
225 - 229 34 35 482 71.78 80.33
230 and above 35 35 496 73.87 82.67

 

Mileage rates

Changes to the HMRC business mileage rates are announced from time to time. The rates at the time of the Budget 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 LPG
Up to 1400cc 12p 11p 8p
1401 - 2000cc 15p 11p 10p
Over 2000cc 21p 16p 14p

 

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

Vehicle Excise Duty ('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 2010 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 £90 £80
E 131 – 140 £110 £110 £100
F 141 – 150 £125 £125 £115
G 151 – 165 £155 £155 £145
H 166 – 175 £250 £180 £170
I 176 – 185 £300 £200 £190
J 186 – 200 £425 £235 £225
K* 201 – 225 £550 £245 £235
L 226 – 255 £750 £425 £415
M Over 255 £950 £435 £425
* includes cars emitting over 225g/km registered between 1 March 2001 and  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 £384 £70.40 £454.40

 

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

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