Broadly, the taxable benefit arising on a car is calculated using the car's full manufacturer's published UK list price, including the full value of any accessories. This figure is multiplied by the 'appropriate percentage', which can be found by reference to the car's CO2 emissions level. This will give the taxable value of the car benefit. The employee pays income tax on the final figure at his appropriate tax rate (e.g. 20% for basic rate taxpayers; 40% for higher rate taxpayers). In general terms, less tax will be payable on 'greener' cars those with lower CO2 emissions.

To provide **stronger incentives for the purchase of ultralow emissions vehicles** (ULEVs), at the 2017 Spring Budget, the government announced that new, lower bands will be introduced for the lowest emitting cars. The appropriate percentage for cars emitting greater than 90g CO2/km will rise by one percentage point. The changes, which are expected to take effect from 6 April 2020, are as follows:

- The graduated table of company car tax bands will include a differential for cars with emissions of 1 to 50g CO2 per km based on the electric range of the car.

- For cars with an electric range of 130 miles or more, the appropriate percentage will be 2%; for cars with an electric range of between 70 to 129 miles, the appropriate percentage will be 5%; for 40 to 69 miles, the appropriate percentage will be 8%; for 30 to 39 miles, the appropriate percentage will be 12%, and for less than 30 miles, the appropriate percentage will be 14%.

- For cars that can only be driven in zero-emission mode, the appropriate percentage will be 2%. For all other bands with CO2 emissions of 51g CO2 per km and above, the appropriate percentage will be based on the CO2 emissions only. For cars with emissions of 51 to 54g CO2 per km the appropriate percentage will be 15%. For cars with emissions above 54g CO2 per km, the bands will be graduated by 5g CO2 per km and the appropriate percentage will increase by 1% for each 5g CO2 per km band, up to a maximum of 37%. For cars with emissions above 90g CO2/km, the appropriate percentage will increase by 1% in comparison to 2019/20 levels.

Whilst at first glance these changes look positive, for 2017/18, the appropriate percentage for a car with a list price of £18,000 and CO2 emissions of just 50gkm, will be 9%. For a higher rate taxpayer, the taxable benefit will be £1,620 (£18,000 x 9%) and the tax payable will be £648 (£1,620 x 40%). In 2018/19, the tax payable by the employee will rise to £936 ((£18,000 x13%) x 40%), representing a 30% increase.

Compare this with an employee (also a higher rate taxpayer) driving a company car with a list price of £18,000, but CO2 emissions of 160g/km. The appropriate percentage for this car is 31% for 2017/18. The taxable benefit will be £5,580 (£18,000 x 31%) and the tax payable will be £2,232 (£5,580 x 40%). In 2018/19, the tax payable rises to £2,376 ((£18,000 x 33%) x 40%), representing only a 6% increase.

Although the tax payable on cars with lower emissions is still considerably lower than those with higher outputs, the increases set to take effect over the next few years will mean 'greener' company car drivers will experience steeper increases in the resulting tax payable. The financial benefits of driving a company car have continued to erode over recent years, but this benefit remains one of the most popular and potent perks of a job.

Broadly, the taxable benefit arising on a car is calculated using the car's full manufacturer's published UK list price, including the full value of any accessories. This figure is multiplied by the 'appropriate percentage', which can be found by reference to the car's CO2 emissions level. This will give the taxable value of the car benefit. The employee pays income tax on the final figure at his appropriate tax rate (e.g. 20% for basic rate taxpayers; 40% for higher rate taxpayers). In general terms, less tax will be payable on 'greener' cars those with lower CO2 emissions.

To provide **stronger incentives for the purchase of ultralow emissions vehicles** (ULEVs), at the 2017 Spring Budget, the government announced that new, lower bands will be introduced for the lowest emitting cars. The appropriate percentage for cars emitting greater than 90g CO2/km will rise by one percentage point. The changes, which are expected to take effect from 6 April 2020, are as follows:

- The graduated table of company car tax bands will include a differential for cars with emissions of 1 to 50g CO2 per km based on the electric range of the car.

- For cars with an electric range of 130 miles or more, the appropriate percentage will be 2%; for cars with an electric range of between 70 to 129 miles, the appropriate percentage will be 5%; for 40 to 69 miles, the appropriate percentage will be 8%; for 30 to 39 miles, the appropriate percentage will be 12%, and for less than 30 miles, the appropriate percentage will be 14%.

- For cars that can only be driven in zero-emission mode, the appropriate percentage will be 2%. For all other bands with CO2 emissions of 51g CO2 per km and above, the appropriate percentage will be based on the CO2 emissions only. For cars with emissions of 51 to 54g CO2 per km the appropriate percentage will be 15%. For cars with emissions above 54g CO2 per km, the bands will be graduated by 5g CO2 per km and the appropriate percentage will increase by 1% for each 5g CO2 per km band, up to a maximum of 37%. For cars with emissions above 90g CO2/km, the appropriate percentage will increase by 1% in comparison to 2019/20 levels.

Whilst at first glance these changes look positive, for 2017/18, the appropriate percentage for a car with a list price of £18,000 and CO2 emissions of just 50gkm, will be 9%. For a higher rate taxpayer, the taxable benefit will be £1,620 (£18,000 x 9%) and the tax payable will be £648 (£1,620 x 40%). In 2018/19, the tax payable by the employee will rise to £936 ((£18,000 x13%) x 40%), representing a 30% increase.

Compare this with an employee (also a higher rate taxpayer) driving a company car with a list price of £18,000, but CO2 emissions of 160g/km. The appropriate percentage for this car is 31% for 2017/18. The taxable benefit will be £5,580 (£18,000 x 31%) and the tax payable will be £2,232 (£5,580 x 40%). In 2018/19, the tax payable rises to £2,376 ((£18,000 x 33%) x 40%), representing only a 6% increase.

Although the tax payable on cars with lower emissions is still considerably lower than those with higher outputs, the increases set to take effect over the next few years will mean 'greener' company car drivers will experience steeper increases in the resulting tax payable.

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