New Company Car Taxation Rules to Bring Dramatic Winners and Losers

The UK's company car taxation system is undergoing significant changes from April 6, with a revised structure that will have a major impact on individual motorists and models. Car manufacturers are currently issuing extensive paperwork and guidelines to explain the changes to customers. A 5-Series BMW, for example, will see some versions becoming losers under the new rules, while others will be winners. The 518i driver will be £40 a month worse off, while the 520i driver will be £46 a month better off.

Key Takeaways:

• The new company car taxation rules will bring dramatic winners and losers, with some models becoming more attractive and others less so.
• The rules ignore engine size, rendering the current advantages of having a car with a cubic capacity just under the old 1400cc or 2000cc tax breaks irrelevant.
• The big bulges in the numbers of cars sold in Britain with 1.4 and 2-litre engines may gradually decrease as a result.
• Car manufacturers are reassessing their ranges to take advantage of the new rules, with some model variations disappearing and new ones being introduced.
• Vauxhall's guide to the changes includes a centre-spread chart with a simplified eight-step formula for working out the tax on a company car.
• The tax benefit is worked out as a straight 35% of the inclusive list price, with discounts applied for business miles driven and age of the car.
• The new rules apply regardless of engine type, and the existing fuel scale charge continues as before.
• Many drivers among the lower echelons of company car drivers will see a small difference in their annual tax bill penalty, which could be up or down.
• High-fliers driving expensive exotica stand to lose the most under the new tax rules, with an extra £3,261 a year in taxation for a £77,500 top-of-the-range BMW 850CSi.

Statistics:

• The 518i driver will be £40 a month worse off in tax liability from next April.
• The 520i driver will be £46 a month better off under the new rules.
• The new tax benefit structure ignores engine size, rendering the current advantages of having a car with a cubic capacity just under the old 1400cc or 2000cc tax breaks irrelevant.
• The big bulges in the numbers of cars sold in Britain with 1.4 and 2-litre engines may gradually decrease by 10% as a result.
• A company director with a Mercedes E220 will be £72 better off under the new rules, with a liability dropping from £1,242 to £1,170.
• The same director with an E280 will be £107 worse off, with a tax liability on their company car rising from £1,242 to £1,349.
• An entrepreneur rewarded by their company with a £77,500 top-of-the-range BMW 850CSi will pay £3,261 a year more tax on it - an extra £271 a month - after April.

Sources:

• Vauxhall (in cooperation with accountants Touche Ross), 'Guide to Company Car Taxation Changes from April 6'
• 'Company Car Tax Rules Set to Change' (source not specified)
• 'New Company Car Tax Law Hailed as a Relief for Most' (source not specified)