05: Company cars and vans

Electric cars and vans: benefit in kind

Employees and directors who are provided with a company car or van that is propelled solely by electricity will not have to pay tax on the benefit. The relief will apply for five years from 6 April 2010. Employers will not have to pay Class 1A national insurance contributions on such vehicles.

Fuel benefit tax

Employees who receive free fuel for private mileage in company cars or vans pay tax on a percentage (which depends on the vehicle’s CO₂ emissions) of a basis figure currently set at £16,900. This basis figure will rise to £18,000 for 2010/11. The corresponding flat taxable amount for vans will rise by 10% to £550.

Benefit in kind charge for 2012/13

The graduated table of company car tax bands will be restructured from 6 April 2012, when the 15% threshold rate will fall to 120g/km as a result of 5g/km reductions in each of the next three tax years. The 10% rate will apply to company cars with CO₂ emissions below 100g/km. An 11% rate will apply for cars with emissions of 100g/km, rising by 1% for each 5g/km thereafter.

Electric vans: capital allowances

Businesses that buy new, unused electric vans will be able to claim a 100% first-year capital allowance. The measure will apply to expenditure from 1 April 2010 for companies, and 6 April 2010 for sole traders and partnerships. This change is subject to confirmation of compatibility with the EU State aid rules.

Don’t forget: If you are about to choose a new company car, check the CO₂ emissions against the next three years’ benefit scales; they are due to change every year and could increase your taxable benefit.

© 9 December 2009. This summary is for general information only and is not intended to be advice to any specific person. You are recommended to seek competent professional advice before taking or refraining from taking action on the basis of the contents of this summary. The summary represents our understanding of the law and HM Revenue and Customs practice as at 9 December 2009, which are subject to change. These proposals may be changed in the Spring 2010 Budget and subsequent legislation, or at any time.