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Major changes to company car tax bands in 2017 Budget

  • Significant changes to company car tax rates
  • All-electric range set to affect BIK levy
  • Capital allowance threshold rate reduced

Major revisions to company car tax rates and capital allowances to encourage drivers into ultra-low-emission vehicles were announced by Chancellor of the Exchequer Phillip Hammond in his 2017 Budget speech. 

Those looking to benefit from the new rules include cars with a long electric-only range or zero tailpipe emissions, with regulation tightening around traditionally 'low' CO2 producing cars - those just under 100g/km.

Changes to the primary rate for capital allowances for business car means you're unlikely to see anything with CO2 emissions more than 110g/km on your company car chooser list. Previously this figure was set at 130g/km.

Major revisions to company car tax rates and capital allowances to encourage drivers into ultra-low-emission vehicles were announced by Chancellor of the Exchequer Phillip Hammond in his 2017 Budget speech.
Those looking to benefit from the new rules include cars with a long electric-only range or zero tailpipe emissions, with regulation tightening around traditionally 'low' CO2 producing cars - those just under 100g/km.
Changes to the primary rate for capital allowances for business car means you're unlikely to see anything with CO2 emissions more than 110g/km on your company car chooser list. Previously this figure was set at 130g/km.

This means that cars such as the Volvo S90 D4 and Infiniti Q50 may be removed from the majority of company car lists, their emissions not dropping below the magical 110g/km threshold.

That said, the former does have an upcoming plug-in hybrid option on the way which will fit comfortably under the 110g/km mark, even if it's expected to be priced far higher than its regular diesel rivals. 

Heavily revised benefit-in-kind tax rates

There are also changes to the way that company car drivers are taxed, with pure electric mileage range set to be taken into account from April 2020.

For 2017/2018, the lowest benefit-in-kind (BIK) levy will be 9% - reserved for cars producing between 0-50g/km of CO2 – while the highest will be 37% for those producing 190g/km or more.

This will be increased in 2018/2019, when the same cars will attract 13% BIK tax, and then 16% for 2019/2020. Meanwhile, in 2018/2019 the maximum 37% levy will drop to cars producing 180g/km or more, and then 165g/km or above in 2019/2020.

Low-tax company cars coming soon

Electric range considered in 2020/2021

From 2020/2021 onwards, pure electric range will also be taken into account when working out benefit-in-kind. For example, cars producing from 0-50g/km with an electric range of 130 miles or more will benefit from 2% BIK taxation, the same as those that produce zero tailpipe emissions. This is significantly less than the current 7% minimum levy zero-emission vehicles are taxed at.

Meanwhile the 1-50 g/km CO2 band has four different BIK taxation rates, all of which are decided by the pure electric range of the car. Those capable of between 70 and 129 miles will be taxed at 5% BIK, increasing to 8% for between 40 and 69 miles, to 12% for 30-39 miles and finally 14% for under 30 miles.

Diesel cars still attract 3% BIK levy over equivalent petrols

Although no significant tax penalties were announced for diesel vehicles, the government has said that 'tax treatment for diesel vehicles' could change as part of an ongoing effort to cut air pollution.

Could the 2017 Vauxhall Insignia Tech Line be your next company car?

Fuel duty frozen as car fuel benefit charge increases

Fuel duty will be frozen again in 2017 for the seventh consecutive year, however employees who use company-funded fuel privately will face an increase in benefit-in-kind tax from 6 April, 2017.

Funding pledge of £113m committed to easing traffic congestion

The government has pledged £90m worth of public money to improving traffic congestion in the North, while promising £23m to the Midlands.

A £690m competition to tackle urban congestion and free-up local transport networks is also set to be announced, with more details to follow shortly.

 

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