Company car tax in the PBR

Today’s Pre-Budget Report laid out plans for significant reform to company car tax. The level of tax is currently based on carbon emissions, a policy introduced in 2002. The government intends to change company car tax.   At the moment, cars emitting 120g of CO2 per km or less pay 10 per cent of their listed value. From 2012, that 10 per cent rate will instead apply to cars that emit 99g or less CO2 per km. The rate will then go up by 1 percentage point for every 5g CO2 per km above 99g CO2 per km. 

Our calculations show that under the new company car tax regime most ordinary cars will see their rate rise by 3 percentage points, with only cars that emit 115 to 119g of CO2 per km getting a cut. This is unlikely to affect many company cars though, unless you’re getting a small car. Company cars tend to be bigger models.  A classic company car for an executive with a family is a Volvo V70 2.0 M5 Petrol that emits 206g of CO2 per km. This faces a 32 percent tax. The lowest emitting Mondeo - another typical company car - will face a 19 percent tax on its value, a 19 percent rise from the 16 percent tax it paid before.

Toyota Prius hybrids will still have to pay a 10 percent tax rate, meaning that even cars with a celebrity-endorsed environmentally friendly reputation are not rewarded by the company car tax reform. 

The change in company car tax is generating extra revenue to the tune of £120 million. The PBR stated transport taxes will be used ‘to ensure that the burden of taxation falls in such a way as to support the transition to low-carbon economy.’ Unfortunately it appears to have missed it objective, and once again the Government are imposing a new burden on motorists and companies who need a mobile workforce so their workforce can grow.

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