Company car tax

No immediate change but salary sacrifice just got a lot more complicated - see below. 

The van benefit charge for 2017/18 will be £610.

For 2020/21 the appropriate percentages for cars emitting 90gCO2/km or over will rise 1% up to a maximum of 37%.

There is good news for low emission cars as the percentage will fall from 16% (2019/20) to just 2% in 2020/21. There will be a new scale from 2% to 14% for cars up to 50g/km which will also depend on the battery range. See Car benefit charges for a fully detailed table.

Salary sacrifice

A consultation led by HMRC in October threatened to sabotage most of the tax benefits of car salary sacrifice from April 2017 but HM Treasury have decided to hold back to some extent. 

  1. Any car salary sacrifice scheme in place before April 2017 will continue to bear its current tax structure until April 2021. (Though of course, the company car tax percentages will still change each year.)
  2. After April 2017 Ultra Low Emission Vehicles can still benefit from the tax savings of a salary sacrifice scheme. ULEVs are currently defined as below 76 g/km but we expect a tightening to 50g/km in a few years time.
  3. From April 2017 if a driver chooses a company car that emits over 75g/km CO2 and takes a lower salary at the same time, the higher of the car benefit and the salary sacrificed will be subject to income tax and Employer's Class 1A National insurance. Though neither element would be subject to Employees NICs. The calculation will need to be done each tax year since the car benefit will usually change even if the salary sacrifice was fixed at the start of the contract. This introduces a complexity to personal tax that has not been seen before. A driver in this category will no longer be able to look at a set of tax tables and work out their tax liability on a particular benefit; instead they will have to look at two sets of tax information, calculate the tax on the car benefit and the salary sacrifice, and then use the calculation which of whichever is the highest. This process will have to be repeated each tax year. 

HMRC are expected to take a broad view of what constitutes a salary sacrifice and include any arrangement where there is a choice between a company car or cash. So the "salary" being sacrificed could include a car allowance or any other payment which appears separately from an individual's contracted salary on a payslip. We guess that HR departments will get busy and expect the concept of a "car allowance" to disappear from the remuneration policies of companies that have company car drivers with cars in the 76 to 120g/km bands.

Comcar will add some functionality to its tax calculators to help in the car decision process, as well as to help check up on tax codes and tax bills in the future.

 

Fuel Benefit

The multiplier for car fuel will rise to £22,600 in 2017/18 from £22,200 this year, whilst the van fuel benefit will rise to £3,230 in 2017/18.

VED

Previously announced change in structure will take place in April 2017. For the first time, Road Fund Duty will depend on the list price and be higher for new cars and fitted options costing over £40,000.

Fuel duty

No change in fuel duty. It remains at 57.95 pence per litre. It must be a tempting tax revenue source to target and please the environmentalists at the same time, but any increase is guaranteed to be highly unpopular.