Budget 2008

The 2008 Budget and what it means to company car drivers.

Here are some key extracts relating to company car drivers.

Income tax - Company cars

No immediate changes announced here. The 2008-09 levels previously announced will also apply to 2009-10. In 2010-2011 the levels will be tightened by 5g CO2. This won't make any difference to cars with emissions below 130g CO2 per km, or already on the maximum 35% bracket, but those in between will be taxed at between 7 and 3% more.

Income tax - Fuel scale benefit charges

A big jump from £14,400 to £16,900 from 6th April 2008 was confirmed. This will push the breakeven mileage even higher for those drivers with high private mileage that currently benefit from employer provided free fuel.

From 6th April 2009 the FBC multiplier will increase by at least the rate of inflation.

These increases could still act as an incentive to drive more miles, as opposed to using other methods of transport, for those drivers that have this benefit and are over the breakeven point.

It was also announced that a measure will be introduced to bring van fuel benefit legislation into line with company cars. We queried this detail with HMRC but were told "There is no essential change, just a minor amendment which has no material effect on employers or employees who drive company vans."

VED

Big changes to VED will affect high emission vehicle running costs, but won't have any impact on company car tax and drivers. The bandings will increase from 7 to 13 in April 2009, with a top rate of £455 by 2010 for older cars. Even higher rates will apply for new cars from April 2010 with a new table for first year VED reaching £950 for cars with emissions over 255gms CO2.

In most cases there will be no impact on P11D prices, although all On-The-Road car prices will change. A few P11D prices may then fall as car manufacturers seek to keep the OTR prices inclusive of VED below key price points . SsangYong for instance have decided to absorb all VED increases so this will reduce the base price by £100 for band G cars.

Fuel duty

Fuel duty will rise by 2ppl on 1st October 2008. (This is a postponement of a previously announced increase due on 1st April) Fuel duty rates will then increase by 0.5 pence per litre above indexation on 01.04.10.

AMAPS

This difficult area has been left alone for now at 40p for the first 10,000 miles and 25p thereafter.

Capital allowances

The results of a long consultation process were announced. From April 2009 cars up to 110g/km CO2 will get 100% first year allowance (FYA), cars from 111g to 160g will attract a 20% writing-down allowance (WDA), and those above 160g will only get a 10% WDA. The rules disallowing a proportion of car lease rental payments will be reformed along the same lines.

It was confirmed that the 100% FYA for very low emission cars would be extended to 31st March 2013, though cars in the 111 to 120gCO2 pkm range will fall out of this "very low" bracket from April 2008. See List of cars up to 110gCO2/km