Taking Account

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Green Cars - tax incentives!

April 06

If you have not already noticed, Gordon Brown and his team at the Treasury are embracing the challenge of climate change, and attempting to do their bit to encourage us to drive cars with lower CO2 emissions. For instance:

  • On Budget day last month changes were announced to the rates of vehicle excise duty. At one end of the scale cars that are rated at 100 g/km or less will pay NO excise duty. Cars with a CO2 rating over 225 g/km, and registered after 31 March 2006 will pay £210 per annum (petrol engine), £215 per annum (diesel engine). There will be a graduated duty for cars in between.
  • For all cars that are registered before the 31 March 2008, and have CO2 emissions of less than 120 g/km, you can claim 100% of the capital cost against your profits (adjusted for private use). Cars over 120 g/km will be restricted to the usual 25% writing down allowance up to a maximum of £3,000 per annum - and again will be adjusted for private use.
  • Employees who use their own CO2 efficient car for business mileage, will be getting more value from the rate per mile they receive for expenses, compared to car owners who run less fuel effective vehicles.
  • A company car driver will pay tax at his or her highest rate, on a scale charge calculated as a percentage of the list price of the company car when new. For cars with emissions below 145 g/km the rate applied is 15% - rising to 35% for the gas guzzlers! So again drivers of the lower rated cars will pay less tax, and, their employers will pay less class 1A National Insurance.

We would be delighted to work out the comparative savings if your business converted to a "Green Car" policy. Although the choice of vehicles may be somewhat limited, and not to every driver's taste, perhaps the tax and cash flow implications are worth looking at.

Hilton Sharp & Clarke