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.
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%.
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.
|Fuel scale charge £||VAT on charge|
|Up to 75||5||8||166||27.67|
|225 and above||35||35||583||97.17|
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.
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|
|Car - fuel only advisory rates|
|1400cc or less||15p||10p|
|1401 - 2000cc||18p||12p|
|1600cc or less||13p|
|1601 - 2000cc||15p|
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.
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|
|* includes cars emitting over 225g/km registered before 23 March 2006|
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.