Company car tax rates to favour low emission vehicles

HMRC has published a policy paper outlining company car tax rates for the three years to 2019/2020, which will see the percentage which is applied to the list price of company cars subject to tax increase by 3% to a maximum of 37%, with lower rates for the lowest emission vehicles

Section 139 of the Income Tax (Earnings & Pensions) Act 2003 (ITEPA) sets out the basis for calculating the appropriate percentage for cars with CO2 emissions.

From 6 April 2019, the graduated table of company car tax bands will provide for a 16% band for cars with emissions of 0-50g CO2 per km, a 19% band for cars with emissions of 51-75g CO2 per km, a 22% band for other low emission cars (76g-94g CO2 per km); and a 1% increase for each rise in emissions of 5g CO2 per kg from 95g CO2 to the existing maximum of 37%.

Section 140 ITEPA sets out the basis for calculating the appropriate percentage for cars without a CO2 emissions figure. From 6 April 2019, the appropriate percentage for the lowest band (cars with a cylinder capacity of up to 1,400cc) will be set at 23%; the appropriate percentage for cars in the medium band (cars with a cylinder capacity greater than 1,400cc but no more than 2,000cc) will be set at 34%; and the appropriate percentage for cars with a cylinder capacity greater than 2,000cc will remain at 37%.

From 6 April 2017, the appropriate percentage for cars which have neither a CO2 emissions figure nor an engine cylinder capacity and which cannot produce CO2 emissions in any circumstances by being driven will be set at 9%. From 6 April 2018, this will be increased to 13%, and from 6 April 2019, to 16%.

Section 142 sets out the appropriate percentage for cars first registered before 1 January 1998. From 6 April 2019, the appropriate percentage for the lowest band (cars with a cylinder capacity of up to 1,400cc) will be set at 23% the appropriate percentage for cars in the medium band (cars with a cylinder capacity greater than 1,400cc but no more than 2,000 cc) will be set at 34%; and the appropriate percentage for cars with a cylinder capacity greater than 2,000cc will remain at 37%.

HMRC’s analysis indicates that the revised charges will bring in an additional £315m in tax in 2019/20 and £320m in 2020/21.

The policy paper is here

 

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