CO2 – then you pay a higher rate for your car’s first year of VED than the ongoing figure. But to encourage the purchase of low CO2 cars a zero rate for the first year was introduced for cars with emissions below 131g/km. If you are running a car through your business, then company car tax comes into play, and this too is linked to CO2. A straightforward equation of the car’s CO2 output, coupled with the car’s list price and your tax band, will tell you how much company car tax – also known as benefit-in-kind (BIK) – you’ll be paying. For the tax year 2011-12, if you’re looking to buy a conventional diesel- or petrol-engined car, and want to be in the lowest company car tax band (10% for a petrol, 13% for a diesel), then 120g/km is the maximum. But be aware that in the following
year (2012/13) you’ll need a car emitting less than 100g/km to achieve the same taxation. For example, a BMW 318d SE
Touring manual has a taxable list price of £27,840, emits 120g/km of CO2 and is subject to a BIK band of 13%. This means that in 2011-12 a driver taxed under PAYE at 40% would pay £1,448 in tax for the year. Our workings-out? (£27,840 x 0.13) x 0.4 = £1,448. However, in 2012-13 the car jumps to BIK band 18%, so the nw calculation would be (£27,840 x 0.18) x 0.4 = £2,004, which means our driver would pay an extra £556 a year in tax.
The message from government is
clear, the higher your CO2 output, the more you will be taxed. Paul Barker, editor of BusinessCar magazine, said: “As part of the government’s Climate Change Act 2008, the UK is committed to cutting its total carbon emissions by 34% by 2020 over a 1990 baseline. “As well as its own targets for
carbon emission reduction, there is pressure from the EU specifically for carmakers to cut emissions. The EU has set a 130g/km average for every carmaker to hit by 2015, with most brands expected to meet this target. “What all this means is that for conventional cars we will be pushed into buying more efficient vehicles or face higher taxation. But equally this means there are also a few incentives for the ‘right’ vehicles. “To encourage the take up of very
low CO2 cars such as electric and plug-in hybrids, the government has introduced a £5,000 grant, but this only serves to bring the price down to the same as an equivalent diesel or petrol. However, there will be significant fuel and servicing cost savings to be had by running an EV, if you don’t need the range. “The only worry about EVs is
what happens when the limited government grant is used up. What we don’t know is if the government can afford to keep funding these vehicles in the long term.” Once you’ve looked at the tax
Budget 2011 (due 23 March) Just after this feature is published, chancellor of the exchequer George Osborne will announce his budget, which will hopefully announce the latest set of VED bands, plus a further year’s BIK rating. In the meantime, the existing BIK ratings are featured overleaf, taking us up to the tax year after next, and the VED bands.
The UK
government is continu-
ing to promote a green agenda when it comes to transport taxation
April / May 2011 | driving
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