Budget 2014: The government has increased the company car tax rates by two percentage points.
In tax year 2017-18 and 2018-19 the appropriate percentage of list price, subject to tax, will increase by two percentage points (to a maximum of 37%) for cars emitting more than 75g of carbon dioxide per kilometre (gCO2/km).
In 2017-18 there will be a four percentage point differential between the 0-50 and 51-75 gCO2/km bands and between the 51-75 and 76-94 gCO2/km bands.
In 2018-19 this differential will reduce to three percentage points. This will reduce further by two in 2019-20 in line with the 2013 Budget announcement.
Alastair Kendrick, tax director at MHA MacIntyre Hudson, said: “The announcement is further disappointment for those having company cars.
“We had expected the government to stand back and consider whether the current approach to the taxation of company cars needed a more detailed review and change of direction.
“The increase year-on-year of two percentage points will add to the tax that employees will have to pay.
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“Clearly in light of the increases employers need to consider their fleet policy and ensure employees are aware of the taxation changes.”
We expected the chancellor to continue with the trend to increase the tax and NIC costs on the provision of company cars and fuel. But the increase in costs for cars at the lower end of the emissions spectrum may come as a surprise to some employers.
These measures may encourage employers to seek alternative methods for supporting employees using cars to travel on business and private journeys that do not include the provision of a company car. Employers may come under added pressure from employees who wish to alleviate the increasing tax cost of company cars and fuel.
Over the last few years employers have been encouraged to ‘go green’, but now where the fleet is made up of the lowest-emission cars, the tax charge is set to increase significantly over the next four years. That’s not much of an incentive to ‘go green’, so perhaps the aim is to stimulate the economy so that only the newest cars get the lowest tax rates and there is an incentive to buy new vehicles?