There are no significant changes to the taxation of company cars and private fuel provided by employers this year. The benefit in kind charge remains at the same figure as for 2006/07: a minimum of 15% of original list price (CO2 rating of 140g/km) to a maximum of 35% (240g/km). The fuel benefit is calculated by applying the same percentage to a set figure of £14,400.
Changes have been announced for 2008/09:
new 10% minimum for ratings up to 120g/km;
15% to 35% range moves down from 140g/km - 240g/km to 135g/km - 235g/km (a 1% increase in percentage for most cars);
a proposed 2% reduction in the percentage for cars able to use E85 fuel (extending existing discounts for LPG, electric and hybrid cars).
Tax Tip
Consider the future tax rates when choosing a company car.
Company vans
The tax increases on company vans which take effect from 6 April 2007 were not mentioned in this year's Budget - they were put in the law years ago. If private use is more than home-to-work travel, the taxable benefit rises from £500 to £3,000. If fuel is provided for that private use, a new tax charge arises on £500.
Tax Trap
Don't get caught by the charge on vans - rule out private use apart from home-to-work travel.
Armed Forces payments
The Budget confirmed that the Operational Allowance paid to members of the Armed Forces who serve in specified areas will be tax-free. This change is backdated to 6 April 2006.
Payments under the Armed Forces Redundancy Scheme will also be free of tax.
