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Small to Medium Businesses

Company Car Tax – What Are The New Rules?

By March 8, 2018February 16th, 2021No Comments

As we near the end of the tax year, it’s a good time to look at the upcoming changes that may affect your business from April. For many employers, taxes on company cars will form a part of those considerations.

interior of a company car

Company cars are a popular employee benefit, received by 26% of workers (or around 959,400 people) who receive any taxable benefit according to the most recent HMRC statistics.

If you provide employees with fuel for a company car, you may be subject to some of the changes that come into effect from 6 April 2018.

So how will the new measures affect you and your employees?

What’s changing?

Company car fuel benefit

Providing fuel to employees for their private use in a company car counts as a taxable benefit.

The cash equivalent of car fuel benefit is calculated using a multiplier, which is fixed each year.

In line with inflation, this multiplier will increase from £22,600 to £23,400 from 6 April 2018.

Diesel supplement

The supplement for company cars running on diesel will increase from 3% to 4%.

This applies to diesel cars that:

  • were registered on or after 1 January 1998
  • don’t meet real driving emissions step two standards (RDE2).

Diesel cars which are certified to RDE2 standard will be exempt from the diesel supplement, so they will be taxed in the same way as petrol cars.

The appropriate percentage applied for cars, including any diesel supplement, will still be capped at 37%.

This change will also come into effect from 6 April 2018.

Electric cars

As well as introducing a £540 million fund in support of electric cars, the government has announced that electricity provided to charge employees’ cars will be exempt from benefit-in-kind tax.

This only applies to electricity provided in workplace charging points for electric or hybrid cars owned by employees, and will apply from April 2018.

What are the impacts?

Chancellor Philip Hammond made it clear in his Autumn Budget 2017 speech that the focus of these changes is on supporting technological development and reducing environmental impacts.

The new tax rules create more of an incentive to opt for cleaner diesel or electric cars, and the increased taxes on diesel will go towards a £220 million Clean Air Fund.

There are also existing incentives to choose an environmentally friendly company car, as lower-emissions cars have a reduced taxable value.

Contact us

A company car is just one of many benefits you could offer employees. Our team of accountants and tax advisers can assist you with any aspect of providing benefits-in-kind.

Contact us or call 0161 336 2222 to talk about how these changes might affect you.

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