April 2013 Company car tax changes…

A few years ago there were fears that the company car was going to be taxed to the point of extinction. The taxman then seemed to realise that wasn’t in anybody’s interest, but now the screw is turning again with things changing from April onwards.


And not for the better.


Companies claim capital allowances for the cars they buy. This is a percentage of the purchase price that can be written off against taxable profits. The main rate is for cars with CO2 emissions of 160g/km or lower. But from April this year that threshold falls to 130g/km or less, meaning that companies are predicted to restrict choice to models falling into this or lower categories.


There is currently a 100 per cent first-year capital allowance for cars with emissions less than 110g/km. From April, that limit falls to 95g/km so increasing numbers of drivers will have to start investigating cars in that category, such as the Fiat 500 TwinAir and Ford Fiesta 1.6 TDCi.


For employees, the tax paid (or Benefit In Kind, known as BIK) is determined by three factors: the car’s total price including options, minus road tax and registration, its carbon dioxide output and its fuel type. The last two factors influence the percentage of the first figure you pay as tax. Over the coming years, there’s going to be a movable feast of increases.


From April, cars emitting between 95-99g/km (e.g. BMW 116d EfficientDynamics and Peugeot 208 1.4 HDi) will be liable for one per cent more tax at 11 per cent and 14 per cent for petrol and diesel models respectively.

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