Company Cars

This month the rules on Company Cars are changing again, so be warned!


A tax benefit to companies is that they can claim capital allowances on the cars they buy.  This is calculated based on the CO2  emissions, with the lower the emissions the better the tax benefit.

Previously cars with emission of between 110g/km and 160g/km qualified for the main pool allowance of 18%, but this is changing to those between 95g/km and 130g/km, restricting the choice of cars in this category.

Cars with emissions below 110g/km used to qualify for 100% first year capital allowance, but from April this only applies to cars with 95g/km and below.


The changes being implemented also effect the employee.  They are taxed on the Benefit in Kind which is determined by the car’s full cost (excluding road tax and first registration), its CO2 emissions and fuel type.  The last two factors effect the percentage of the car’s value that you pay as tax.  Although diesel cars generally have lower CO2 emissions, the fuel costs more so this is something to consider in these times of rising prices.

For time being, cars with zero emissions will continue to enjoy zero Benefit in Kind, whilst those with emissions of up to 75g/km will continue  to be taxed at 5%. Those with emissions of 76-94g/km will be taxed at 10%.  Those with emissions of 95-215g/km this will increase by 1% up to a maximum of 35%.


These rules are due to change again over the next few years so it is something to look at carefully when next looking at your company car options.