Budget 2005

The 2005 Budget and what it means to company car drivers.

The budget kept the existing company car taxation regime in place, apart from a simplification of the discount structure for cars running on alternative fuels. Only drivers of Honda Insights, perhaps one
of the most environmentally friendly cars, will see their tax bill jump up by 20% from April 2006 (because the CO2 percentage jumps from 10% to 12%) whereas drivers of larger bi-fuel vehicles will see a small reduction.

The budget did not do anything to help reduce greenhouse gas emissions, and so we might expect some tougher measures after the General Election.

Income tax - Company cars

The CO2 based system is to continue. Tightening will continue to 2005/6 but then rates will remain the same for 2006/7 and 2007/8

Many drivers will see car tax jump up by 3 to 7% of the tax amount as the CO2 bandings reduce again in April 2005 but flatten out thereafter for at least 2 years.

Use the tax calculator to see the precise figures for current cars up to 2007/8.

For 2006/7 there will be a change in the calculation structure for alternative fuels:

Bi-fuel gas and petrol cars manufactured or converted before type approval will get a simple 2% discount (previously 1% plus an additional 1% for each 20g/km below the minimum petrol percentage). The tax impact will benefit larger vehicles such as a Mitsubisihi where the CO2 percentage will fall from 31% to 30%.

Hybrid electric and petrol cars will get a simple 3% discount (previously 2% discount plus an additional 1% for each 20g/km below the minimum petrol percentage) The Toyota Prius and Honda Civic IMA will remain on 12% , but Honda Insight drivers will move up from 10% to 12%. (OK - Perhaps thats less than a hundred drivers, but its a poor reward for pioneering low emission technology)

Income tax - Fuel scale benefit charges

Following the Chancellor's announcements in 2002, the calculation is based on the same method as car tax, using the identical percentage derived from the CO2 emissions. This percentage is to be applied to an annual fuel list price equivalent of £14,400 for all cars and fuel types. See the fuel benefit calculator for a table and check to see if it is worth-
while. The Chancellor has announced that £14,400 will also be the figure to be used for the 2005/6 tax year. For many cars, this means that the tax charge will rise by 3 to 7% because of the tightening CO2 percentages. Look at the tax calculator to see the relevant figures for new cars.

Intranet information

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