Tax and Travel

Car and fuel benefits

The taxable petrol and diesel car benefit is based on the car's CO₂ emissions. It is calculated using the car's UK list price and applying the 'appropriate percentage' as shown in the table below. The first two lines of figures in the table relate to qualifying low emissions cars (QUALECs).

The car fuel benefit is calculated by applying the same percentages to the fuel multiplier, which for 2010/11 increases from £16,900 to £18,000.

The percentages are reduced for cars (except QUALECs) that can be driven on alternative fuels by:

2% for cars manufactured to be capable of being run on E85 fuel
2% for bi-fuel cars or those which run on LPG only
3% for hybrid electric and petrol cars.

For cars which cannot produce CO₂ engine emissions under any circumstances when driven, the appropriate percentage is reduced to 0%, thereby reducing the car benefit charge to nil.

For cars emitting between 1 and 75g/km the appropriate percentage is reduced to 5% for 5 years from 6 April 2010.

Future changes

With effect from 6 April 2011, the list price cap of £80,000 is being withdrawn. This will increase substantially the tax charge for drivers of very expensive cars. For example for a car with a list price of £170,000 and CO₂ emissions of 320g/km, the annual taxable benefit will increase from £28,000 to £59,500.

For each of the two next tax years, the CO₂ emissions thresholds will be shifted down by 5g/km and from 6 April 2012 the table of tax bands will be extended down to a new 10% band for cars emitting up to 99g/km. This will replace the existing 10% band, so that QUALECs will no longer exist as a separate category.

VAT on fuel for private use in cars

Where businesses wish to reclaim the input VAT on fuel which has some degree of private use, they must account for output VAT on a scale charge.

The table shows the VAT chargeable for quarters commencing on or after 1 May 2010.

CO₂ emissions (g/km)	Appropriate percentage		Quarterly VAT
CO₂ emissions (g/km)	Petrol %	Diesel %	Fuel scale charge £	VAT on charge £
Up to 75	5	8	141	21.00
76 - 120	10	13	141	21.00
121 - 134	15	18	212	31.57
135 - 139	16	19	227	33.80
140 - 144	17	20	241	35.89
145 - 149	18	21	255	37.97
150 - 154	19	22	269	40.06
155 - 159	20	23	283	42.14
160 - 164	21	24	297	44.23
165 - 169	22	25	312	46.46
170 - 174	23	26	326	48.55
175 - 179	24	27	340	50.63
180 - 184	25	28	354	52.72
185 - 189	26	29	368	54.80
190 - 194	27	30	383	57.04
195 - 199	28	31	397	59.12
200 - 204	29	32	411	61.21
205 - 209	30	33	425	63.29
210 - 214	31	34	439	65.38
215 - 219	32	35	454	67.61
220 - 224	33	35	468	69.70
225 - 229	34	35	482	71.78
230 and above	35	35	496	21.00

Mileage rates

Changes to the HMRC business mileage rates are announced from time to time. The rates at the time of the Budget are as follows:

Vehicle	First 10,000 miles	Thereafter
Car / Van	40p	25p
Motorcycle	24p	24p
Bicycle	20p	20p

Car - fuel only advisory rates
Engine Capacity	Petrol	Diesel	LPG
Up to 1400cc	11p	11p	7p
1401 - 2000cc	14p	11p	8p
Over 2000cc	20p	14p	12p

The fuel only advisory rates relate to company cars only. They can be applied as a tax-free maximum rate for employees claiming for petrol used on business journeys and for employees reimbursing their employers with the cost of petrol used for private journeys.

HMRC will consider claims for a higher maximum rate, if it can be demonstrated that it is necessary for an employee to use a car with higher than average fuel costs.

Car costs – Vehicle Excise Duty (VED) rates

Vehicle Excise Duty ('Car Tax') rates also reflect emissions, with lower scale rates for cars using alternative fuels. The following table shows the rates which apply from 1 April 2010 for cars registered on or after 1 March 2001:

VED Band	CO₂ emissions (g/km)	First year rate	Standard rate
VED Band	CO₂ emissions (g/km)	First year rate	Petrol & Diesel	Alternative fuels
A	Up to 100	£0	£0	£0
B	101 – 110	£0	£20	£10
C	111 – 120	£0	£30	£20
D	121 – 130	£0	£90	£80
E	131 – 140	£110	£110	£100
F	141 – 150	£125	£125	£115
G	151 – 165	£155	£155	£145
H	166 – 175	£250	£180	£170
I	176 – 185	£300	£200	£190
J	186 – 200	£425	£235	£225
K*	201 – 225	£550	£245	£235
L	226 – 255	£750	£425	£415
M	Over 255	£950	£435	£425
* includes cars emitting over 225g/km registered between 1 March 2001 and 23 March 2006

Company vans

The unrestricted private use of vans is £3,000. There is a further £550 taxable benefit if the employer provides fuel for private travel.

Van and fuel charge	Van	Fuel	Total
Tax (20% taxpayer)	£600	£110	£710
Tax (40% taxpayer)	£1,200	£220	£1,420
Tax (50% taxpayer)	£1,500	£275	£1,775
Employer’s Class 1A NICs	£384	£70.40	£454.40

The flat rate of £3,000 is reduced to nil for vans emitting zero CO₂. There will be no fuel benefit for such vans.