Budget 2010

Budget 2010

Introduction

Personal Income Tax

Tax Credits

National Insurance Contributions

Employees

Savings

Capital Gains Tax

Inheritance Tax

Stamp Duty Land Tax

Corporation Tax

Business Tax

Value Added Tax

Other Measures

Tax Tables

National Insurance

Employees

Company cars and fuel (Table C)

The taxable benefit on most company cars is calculated using a percentage of the original list price. The percentage depends on the car's level of CO2 emissions. The tax charges have been used in recent years as an incentive for employers and individuals to choose "greener" cars, by increasing the rates on higher emissions and introducing new lower rates for lower emissions. This has resulted in taxable benefits changing from year to year even though an employee keeps the same car.

For 2010/11, the following rules remain the same:

The maximum percentage is 35% for petrol or diesel cars
For diesels, 3% is added to the percentage for a petrol car with the same emissions, subject to the 35% maximum
Once a set figure is reached - this has been lowered year by year to increase the "green" incentive - the percentage is increased by one point for every complete 5g/km increase in the CO2 rating

The following changes apply from 6 April 2010:

Electric cars, which cannot emit CO2 at all, will not create a chargeable benefit for five years (to 2014/15)
Cars with a rating up to 75g/km will be charged on 5% of the list price (8% for diesels) for the same five years
Cars with a rating from 76g/km to 120g/km will continue to be charged on 10%/13%
Above 120g/km, the basic charge is 15% (18% diesel), but the threshold for 1% increases falls from 135g/km to 130g/km - so the additions begin at 135 (16%/19%), 140, 145 etc. rather than at 140, 145, 150 etc.
The maximum charge (35%) applies at 230g/km (petrol) or 215g/km (diesel)

The lowering of the threshold will increase the tax charge by a small amount for most drivers - those with cars rated between 135g/km and 234g/km. There is a more significant increase in the tax charge on the benefit of free fuel provided by an employer for private motoring in a company car. The same percentage rate applies as for the car benefit itself, but the fixed figure it is multiplied by rises from £16,900 to £18,000. The taxable benefit on a petrol car with a 130g/km rating has therefore risen from £2,535 to £2,700, and the maximum benefit has risen from £5,915 to £6,300 (a 6.5% increase).

Tax Tip

Consider the tax charges when choosing a company car.