Most cars are taxed relating to bands of CO2 emissions. The percentage applied to each band has typically gone up by 1% each year, with an overriding maximum charge of 35% of the list price of the car.
This year, the bands have gone up by 2% and the maximum charge is increased to 37%. So a petrol car with a list price of £30,000 and CO2 emissions of 135, will see an increase in the taxable benefit from £6,000 to £6,600.
These substantial increases may encourage businesses to consider changing their company cars for those with lower CO2 emissions.
Unfortunately it won’t get much better! From 6 April 2016 there will be a further 2% increase in the percentage applied to each band, with similar increases in the following two years. For 2019/2020, the increase will by 3%.
So, if the same car is still owned in 2019/2020, the car benefit will be £9,300 – even though the vehicle is nine years old!
There is a small bit of good news on the horizon for diesel cars.The 3% supplement to the percentages will be removed from 6 April 2016.