Budget March 2011: Tax and travel

Wednesday 23rd March 2011

Car and fuel benefits

The taxable petrol and diesel car benefit is based on the car’s CO₂ emissions. It is calculated using the car’s UK list price and applying the ‘appropriate percentage’ as shown in the table below. The first two lines of figures in the table relate to qualifying low emissions cars (QUALECs).

The car fuel benefit is calculated by applying the same percentages to the fuel multiplier, which for 2011/12 is £18,800.

For cars which cannot produce CO₂ engine emissions under any circumstances when driven (‘zero emission cars’, including those powered solely by electricity), the appropriate percentage is reduced to 0%, thereby reducing the car benefit charge to nil.

For cars emitting between 1 and 75g/km the appropriate percentage is reduced to 5% (8% for diesel) for 5 years from 6 April 2010.

List price cap

With effect from 6 April 2011, the list price cap of £80,000 is withdrawn. This will increase substantially the tax charge for drivers of very expensive cars. For example for a car with a list price of £170,000 and CO₂ emissions of 320g/km, the annual taxable benefit will increase from £28,000 to £59,500.

Future changes

From 6 April 2012 the table of tax bands will be extended down to a new 10% band for cars emitting up to 99g/km. This will replace the existing 10% band, so that QUALECs will no longer exist as a separate category. The rate for emissions of 100g/km will be 11% and will increase by 1% for every 5g/km to a maximum of 35%, as at present.

VAT on fuel for private use in cars

Where businesses wish to reclaim the input VAT on fuel which has some degree of private use, they must account for output VAT on a scale charge.

The table shows the VAT chargeable for quarters commencing on or after 1 May 2011.

CO₂ emissions	Appropriate percentage		Quarterly VAT
(g/km)	Petrol %	Diesel %	Fuel scale charge £	VAT on charge
(g/km)	Petrol %	Diesel %	Fuel scale charge £	£ (20%)
Up to 75	5	8	157	26.17
76 to 120	10	13	157	26.17
121 – 124	15	18	157	26.17
125 - 129	15	18	236	39.33
130 – 134	16	19	252	42.00
135 – 139	17	20	268	44.67
140 – 144	18	21	283	47.17
145 – 149	19	22	299	49.83
150 – 154	20	23	315	52.50
155 – 159	21	24	331	55.17
160 – 164	22	25	346	57.67
165 – 169	23	26	362	60.33
170 – 174	24	27	378	63.00
175 – 179	25	28	394	65.67
180 – 184	26	29	409	68.17
185 – 189	27	30	425	70.83
190 – 194	28	31	441	73.50
195 – 199	29	32	457	76.17
200 – 204	30	33	472	78.67
205 – 209	31	34	488	81.33
210 – 214	32	35	504	84.00
215 – 219	33	35	520	86.67
220 – 224	34	35	536	89.33
225 and above	35	35	551	91.83

Mileage rates

Changes to the HMRC business mileage rates are announced from time to time. The rates from 6 April 2011 are as follows:

Vehicle	First 10,000 miles	Thereafter	Car – fuel only advisory rates Engine capacity	Petrol	Diesel	LPG
Car/van	45p	25p	up to 1400cc	14p	13p	10p
Motorcycle	24p	24p	1401 - 2000cc	16p	13p	12p
Bicycle	20p	20p	Over 2000cc	23p	16p	17p

The fuel only advisory rates relate to company cars only. They can be applied as a tax-free maximum rate for employees claiming for petrol used on business journeys and for employees reimbursing their employers with the cost of petrol used for private journeys.

HMRC will consider claims for a higher maximum rate, if it can be demonstrated that it is necessary for an employee to use a car with higher than average fuel costs.

Car costs – Vehicle Excise Duty (VED) rates

VED (‘Car Tax’) rates also reflect emissions, with lower scale rates for cars using alternative fuels. The following table shows the rates which apply from 1 April 2011 for cars registered on or after 1 March 2001:

VED Band	CO₂ Emissions (g/km)	First Year Rate	Standard Rate
VED Band	CO₂ Emissions (g/km)	First Year Rate	Petrol & Diesel	Alternative Fuels
A	Up to 100	£0	£0	£0
B	101 - 110	£0	£20	£10
C	111 - 120	£0	£30	£20
D	121 - 130	£0	£95	£85
E	131 - 140	£115	£115	£105
F	141 - 150	£130	£130	£120
G	151 - 165	£165	£165	£155
H	166 - 175	£265	£190	£180
I	176 - 185	£315	£210	£200
J	186 - 200	£445	£245	£235
K*	201 - 225	£580	£260	£250
L	226 - 255	£790	£445	£435
M	Over 255	£1,000	£460	£450

*includes cars emitting over 225g/km registered before 23 March 2006.

Company vans

The taxable benefit for the unrestricted private use of vans is £3,000. There is a further £550 taxable benefit if the employer provides fuel for private travel.

Van and fuel charge	Van	Fuel	Total
Tax (20% taxpayer)	£600	£110	£710
Tax (40% taxpayer)	£1,200	£220	£1,420
Tax (50% taxpayer)	£1,500	£275	£1,775
Employer's Class 1A NICs	£414	£75.90	£489.90

The flat rate of £3,000 is reduced to nil for vans emitting zero CO₂. There is no fuel benefit for such vans.

It may be cheaper for all concerned for the employee to meet the initial cost and then be reimbursed in accordance with HMRC’s published rates.

Return to Budget summary and index