News
December 2007
Company Car Drivers and Fuel
The Pre-Budget report also contained an announcement which will affect some company car drivers.
The current rules for employees state that if a car is made available for an employee’s private use, a benefit in kind charge arises. This charge is calculated using the list price of the car and a percentage linked to its CO2 emissions. The percentages range from 15% to 35% for most cars. Discounts are available for certain environmentally friendly cars.
If the employee is also provided with free fuel for private motoring then a fuel benefit charge arises based on the percentage used for the car benefit and a ‘multiplier’, which is currently £14,400. For 2008/09 this figure will increase to £16,900.
The fuel scale charge figure has not changed since it was introduced in 2003. This rise, when combined with an increase in the car benefit percentages for 2008/09, will mean that many employees will see a substantial increase in their tax bills from next April. This change will initially make itself felt in the form of an increase in the benefits in kind included in their coding notices for the year, meaning that more tax will be deducted from their pay.
There will also be an additional cost to employers as the related Class 1A NI charge will also increase.
Internet links: HMRC notice and HMRC CO2 percentage table
