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CO2 Emissions and Company Car Tax

By: Tracy Wilkinson - Updated: 2 Aug 2013 | comments*Discuss
 
Motoring Budget Co2 Emissions Company

If you are one of the many people who drive a car during the course of your work, then the company that you work for may choose to enhance your motoring experience and provide a car for you. This means that you will be taxed accordingly. Unfortunately, a driving a company provided car isn‘t quite the same perk that it used to be and you'll need to make sure that your budget can stretch to it.

Up until 2002 company car tax was always worked out on the mileage covered during the course of business, but in April 2002 a huge shake-up of the company car tax laws was introduced, which instead based the benefit in kind rates on the amount of carbon dioxide emissions the company car produced. The higher the car's C02 emissions, the more tax the driver is likely to pay.

How to Work Out Exactly What a Company Car is Going to Cost?

If you've been given the option of getting a company car, then you'll probably be wanting to know how it is going to affect you financially. Believe it or not, despite the financial assistance from your company, with the ‘wrong’ car you could end up being worse off, while doing your research and choosing the ‘right’ car can save you a fortune - so how do you go about it?

  • First of all you need to investigate your car's C02 emissions. They will be stated in g/km format (grammes per kilometre) on the official Vehicle Certification Agency website which can be found at: www.vcacarfueldata.org.uk
  • If you have a vehicle that runs on a diesel engine, you'll need to find out whether the car complies with the Euro III or Euro IV emission regulations. This can make a difference as to whether or not you will need to pay a diesel surcharge of 3%. The date the car was manufactured or first registered can also make a difference to the tax you'll pay, so if it isn't a brand new car you're getting, make sure you get this information.
  • If you have a petrol engine, then it’s much easier and you can just look up your car in the carbon-dioxide table and find out what kind of tax percentage you will need to pay.
  • In line with the clean, green direction that the government are taking over the last few years, cars that run on alternative fuels have cheaper tax rates than petrol or diesel cars. Hybrids such as the Toyota Prius or Honda Civic can be 2% cheaper along with some extra deductions based on how low the emissions are. Electric cars can attract a rate of up to 6% less and LPG and CNG bio-fuel cars are also offered savings on the standard petrol/diesel rates which are subject to change so make sure you check to ensure you find the best rate you can get.
  • Next, you need to work out what the list price of your car is: this figure should exclude road tax and registration costs, but include any options included in the build. This price is referred to as the P11D price.
  • Once you've worked out the car's P11D price, you need to multiply it by whatever your tax liability figure was.

This will give you a figure that should equate to your company car tax cost.

Less Tax Cost - What is the Best Car to Get?

If you are wanting to keep your costs as low as possible, then you’re best off going for a car that falls into band A or B - which means that it has Co2 emissions of up to 120g per kilometre. This includes both petrol and diesel cars, and just a few of the choices in this category are:

  • TOYOTA Prius 1.5 VVT-i Hybrid
  • CITROEN C1 1.0i 3 & 5 door
  • TOYOTA Aygo 1.0 VVT-i 3 & 5 door
  • FORD Focus, 2008¼ Model Year Onwards 1.6 Duratorq TDCi (90PS) Estate
  • BMW 1 Series E81/E82/E87/E88 118d 3-door
  • AUDI A3 Sportback, 1.9 e TDI 105PS with DPF

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