Changes to Company Car Tax
Background
From 6 April 2018 the tax rates applied to company cars, based on their emission levels, will be subject to another annual increase. This year there is also an increase in the diesel supplement charge that is applied on top of these rates. These increases are part of the government’s aim to encourage individuals to choose lower emission vehicles.
Details
For the tax year 2018/19 zero emission electric cars have been given their own tax band, although the tax rate charged will treat the cars the same as those that emit 1-50 g/km in CO2 emissions.
From 6 April 2018 the tax rates for company cars will start at 13% for emissions levels of 0-50 g/km, an increase of 4% on 2016/17, with the majority of other emission bands seeing an increase of 2% on 2016/17.
The maximum tax rate applied to company cars remains at 37%, but the emission levels falling into this band will reduce to 180 g/km and above.
The diesel supplement charge, which is applied on top of the electric and petrol rates, will increase from the 6 April 2018 to 4% from the previous rate of 3%. This remains subject to an overall maximum of 37% however. There is no change to the current position that the diesel supplement does not apply to hybrid cars.
The 4% diesel supplement charge will only apply to diesel cars that are not certified to the Real Driving Emissions 2 (RDE2) standard.
It is worth also considering when choosing a new vehicle that the tax rates for 2019/20 are intended to increase by 3% for most emission levels up to 169 g/km.
There is one further benefit for electric vehicles. From 6 April 2018, there will be no benefit in kind charge on electricity that employers provide to charge an employees’ electric vehicle.
If you have any questions on the above or would like advice in connection with a particular vehicle please contact our Tax Director, Jenny Marks.
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