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Tax and Travel

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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 on the right. The car fuel benefit is calculated by applying the same percentages to the fuel benefit charge multiplier, which for 2015/16 is £22,100.

From April 2015, the five year exemption for zero carbon and the lower rate for ultra-low carbon emission cars came to an end. Two new bands were introduced for ultra-low emission vehicles (ULEVs). These were set at 0-50 g/km and 51-75 g/km.

The appropriate percentages for the remaining bands have increased by 2% for cars emitting more than 75 g/km, to a new maximum of 37%.

Future changes

From April 2016, all the appropriate percentages will be increased by 2% up to the maximum of 37%. In addition, new European standards which come into force in September 2015 require diesel cars to have the same air quality emissions as petrol cars. The 3% diesel supplement will therefore be removed in April 2016, so that diesel cars will then be subject to the same level of tax as petrol cars.

The appropriate percentage will increase by 2% for cars emitting more than 75 g/km to a maximum of 37% in each of years 2017/18 and 2018/19.

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 for which they may use the flat rate valuation charge. The table above shows the VAT chargeable for quarters commencing on or after 1 May 2015.

CO2
emissions
Appropriate
percentage
Appropriate
percentage
Quarterly VAT
(g/km) Petrol
%
Diesel
%
Flat Rate Valuation VAT on charge
0 - 50 5 8 £133 £22.17
51 - 75 9 12 £133 £22.17
76 - 94 13 16 £133 £22.17
95 - 99 14 17 £133 £22.17
100 104 15 18 £133 £22.17
105 109 16 19 £133 £22.17
110 114 17 20 £133 £22.17
115 199 18 21 £133 £22.17
120 - 124 19 22 £133 £22.17
125 - 129 20 23 £200 £33.33
130 - 134 21 24 £213 £35.50
135 - 139 22 25 £227 £37.83
140 - 144 23 26 £240 £40.00
145 - 149 24 27 £254 £42.33
150 - 154 25 28 £267 £44.50
155 - 159 26 29 £281 £46.83
160 - 164 27 30 £294 £49.00
165 - 169 28 31 £308 £51.33
170 - 174 29 32 £320 £53.33
175 - 179 30 33 £334 £55.67
180 - 184 31 34 £347 £57.83
185 - 189 32 35 £361 £60.17
190 - 194 33 36 £374 £62.33
195 - 199 34 37 £388 £64.67
200 - 204 35 37 £401 £66.83
205 - 209 36 37 £415 £69.17
210 - 214 37 37 £428 £71.33
215 - 219 37 37 £441 £73.50
220 - 224 37 37 £455 £75.83
225 and above 37 37 £468 £78.00

Company vans

The taxable benefit for the unrestricted private use of vans is £3,150. There is a further £594 taxable benefit if the employer provides fuel for private travel.

Van and fuel
charge
Van £ Fuel £ Total £
Tax (20% taxpayer) 630 118.80 748.80
Tax (40% taxpayer) 1,260 237.60 1,497.60
Tax (45% taxpayer) 1,417.50 267.30 1,684.80
Employer's Class 1A NICs 434.70 81.97 516.67

Zero emission vans

As previously announced, the van benefit for zero emission vans is to be increased on a tapered basis so that there will be a single van benefit charge applying to all vans by April 2020. For 2015/16 the charge will be 20% of the value of the standard van benefit charge (i.e. £630). There is no fuel benefit for such vans.

Mileage rates

Changes to the HMRC business mileage rates are announced from time to time. The rates from 1 June 2015 are as follows:

Car - fuel only advisory rates

Vehicle First
10,000
miles
Thereafter Engine
Capacity
Petrol Diesel LPG
Car/van 45p 25p 1400cc or less 12p 10p 10p
Motorcycle 24p 24p 1401cc to
1600cc
14p 10p 9p
Bicycle 20p 20p 1601cc to
2000cc
14p 12p 9p
Over 2000cc 21p 14p 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.

Plug-in Grants

Motorists (private or business) purchasing new qualifying ultra-low emission cars can receive a grant of 25% towards the cost of the vehicle, up to a maximum of £5,000. The scheme also covers 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 75 g/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.

Car costs Vehicle Excise Duty (VED) rates

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 2015 for cars registered on or after 1 March 2001:

VED Band CO2
Emissions
(g/km)
First Year
Rate
£
Standard 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 0 110 100
E 131 - 140 130 130 120
F 141 - 150 145 145 135
G 151 - 165 180 180 170
H 166 - 175 295 205 195
I 176 - 185 350 225 215
J 186 - 200 490 265 255
K* 201 - 225 640 290 280
L 226 - 255 870 490 480
M Over 255 1,100 505 495

*includes cars emitting over 225 g/km that were registered before 23 March 2006.

Reforms to VED

All cars first registered before 1 April 2017 will remain in the current VED system, which will not change. For cars first registered from 1 April 2017 onwards the following reforms will be introduced:

    ?
  • First Year Rates will vary according to the CO2 emissions of the vehicle
  • ?
  • a flat Standard Rate of £140 will apply in all subsequent years (except zero-emission cars for which the Standard Rate will be £0)
  • ?cars with a list price above £40,000 will attract a supplement of £310 for the first five years in which a Standard Rate is paid.

From 2020/21 revenues from VED will be used to create a new Roads Fund.

MOTs

The Government will explore the options for requiring motorists with new cars to undergo the first MOT after four years, rather than three, as part of the forthcoming Motoring Services Strategy.

This Budget Report was prepared immediately after the Chancellor's Budget Statement based on official press releases and supporting documentation. The Budget proposals are subject to amendment before the Finance Act receives Royal Assent. This Report is for guidance only, and professional advice should be obtained before acting on any information contained herein. No responsibility can be accepted by the publishers or the distributors for loss occasioned to any person as a result of action taken or refrained from in consequence of the contents of this publication.