Damian James: Employers should plan now for future company car tax changes

The lower a car’s CO2 emissions figure, the lower the benefit-in-kind tax bill is for employees. That is the mantra that all organisations running company car fleets should have been following for 10 years, since the advent of CO2-based company car benefit-in-kind tax in 2002.

The coalition government has continued the policy of tightening benefit-in-kind tax thresholds year on year and has already announced rates to the end of 2016/17. In 2013/14, the 10% company car tax rate applies to cars with emissions of 76-94g/km, but that will rise to 11% in 2014/15, with corresponding increases in other thresholds up to 35% (CO2 emissions of 215g/km and above in 2013/14 and 210g/km and above in 2014/15).

To enable long-term fleet planning, the government has promised rates will be announced three years in advance. As a result, rates for 2017/18 will be announced in the 2014 Budget. A number of key tax changes have been announced, so fleets should plan for them. These include a partial U-turn thanks to ACFO lobbying on tax rates on ultra-low-emission models.

In the 2012 Budget, the Chancellor announced rates on electric company cars would leap from 0% currently to 13% in 2015/16. This year, he announced a series of changes (see box page 44) at the lower end of the company car benefit-in-kind tax scale, including a 5% rate on 0-50g/km cars in 2015/16 and cars with emissions of 51-75g/km facing a 9% charge. Cars with emissions of 1-75g/km are now taxed at 5% and those with zero emissions at 0%.

Another key change will be a review of company car tax incentives for ultra-low emission cars in the light of market developments in the 2016 Budget. So, fleet decision-makers must compile the most cost-effective car choice lists from the plethora of low-emission models now available and drivers must make their decisions, while bearing in mind that cars must be fit for purpose.

Damian James is deputy chairman, Association of Car Fleet Operators (ACFO)