Company car tax band changes explained

• Four new tax bands created
• New bands start at 10%
• Zero CO2 emissions exemption remains

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The company car tax system changes on April 1, with four new bands to reflect the lower average CO2 emissions of many new cars.

Cars that are zero-rated for CO2 retain their exemption from company car tax, while those that emit 1-75g/km will continue to be taxed at 5%.

However, the current 76g-120g/km bracket is to be split into five sections.

The new company car tax bands are split as follows:
• 76-99g/km = 10%
• 100-104g/km = 11%
• 105-109g/km = 12%
• 110-114g/km = 13%
• 115-119g/km = 14%

The 3% surcharge for diesel cars remains, although no car will pay more than 35% tax.

This 35% top-level tax will apply to vehicles that emit more than 220g/km, down from the previous figure of 225g/km.

The changes are designed to reflect the fact that average CO2 emissions for new cars sold in the UK have fallen from 164.9g/km in 2007 to 138.1g/km in 2011.

Company car tax – how it's worked out
Company car tax is calculated using the price of the car, the CO2 emissions and the employee’s income-tax band.

A driver that pays 20% income tax and runs a VW Golf Bluemotion 1.6 TDI emitting 99g/km and costing £20,000 would calculate tax liability as follows:

99g/km = 10% company car tax
10% of £20,000 = £2000
20% of £2000 = £400
Total to pay: annual company car tax bill = £400, or £33.34 per month.

2012-2013 tax bands
Figures for diesel vehicles with 3% surcharge in brackets.

Zero emission vehicles – 0%
1-75g/km – 5%
76-99g/km – 10% (13%)
100-104g/km – 11% (14%)
105-109g/km – 12% (15%)
110-114g/km – 13% (16%)
115-119g/km – 14% (17%)
120-124g/km – 15% (18%)
125-129g/km – 16% (19%)
130-134g/km – 17% (20%)
135-139g/km – 18% (21%)
140-144g/km – 19% (22%)
145-149g/km – 20% (23%)
150-154g/km – 21% (24%)
155-159g/km – 22% (25%)
160-164g/km – 23% (26%)
165-169g/km – 24% (27%)
170-174g/km – 25% (28%)
175-179g/km – 26% (29%)
180-184g/km – 27% (30%)
185-189g/km – 28% (31%)
190-194g/km – 29% (32%)
195-199g/km – 30% (33%)
200-204g/km – 31% (34%)
205-209g/km – 32% (35%)
210-214g/km – 33% (35%)
215-219g/km – 34% (35%)
220g/km or more – 35% (35%)

Tom Webster