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 on the right. The car fuel benefit is calculated by applying the same percentages to the fuel benefit charge multiplier, which for 2014/15 is £21,700.

For cars which cannot produce CO2 engine emissions under any circumstances when driven ('zero emission cars', including those powered solely by electricity), the appropriate percentage is reduced to 0%, thereby reducing the car benefit charge to nil. For cars emitting between 1g/km and 75g/km the appropriate percentage is reduced to 5% (8% for diesel) for five years from 6 April 2010.

The lower threshold will be reduced from 115g/km to 110g/km with effect from April 2014. The lowest appropriate percentages will remain at 0% and 5%. The appropriate percentage will increase by 1% for all vehicles with CO2 emissions between 95g/km and 210g/km, to a maximum of 35%.

Future changes

From April 2015, there will be two new appropriate percentage bands for company cars emitting 0-50g/km CO2 (5%) and 51-75g/km CO2 (9%). The remaining appropriate percentages are increased by 2% for cars emitting more than 75g/km CO2 to a new maximum of 37%.

From April 2016, all the appropriate percentages are increased by 2% up to the maximum of 37%. The diesel supplement will be removed, so that diesel cars will be subject to the same level of tax as petrol cars.

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 for which they may use the flat rate valuation charge. The table below shows the VAT chargeable for quarters commencing on or after 1 May 2014.

CO2 emissions
Appropriate
percentage
Quarterly VAT

(g/km)
Petrol
%
Diesel
%
Fuel scale charge £ VAT on charge
 £
Zero 0 0





156






26.00
Up to 75 5 8
76-94 11 14
95 - 99 12 15
100 - 104 13 16
105 - 109 14 17
110 - 114 15 18
115 - 119 16 19
120 - 124 17 20
125 - 129 18 21 234 39.00
130 - 134 19 22 251 41.83
135 - 139 20 23 266 44.33
140 - 144 21 24 282 47.00
145 - 149 22 25 297 59.50
150 - 154 23 26 313 52.17
155 - 159 24 27 328 54.67
160 - 164 25 28 345 57.50
165 - 169 26 29 360 60.00
170 - 174 27 30 376 62.67
175 - 179 28 31 391 65.17
180 - 184 29 32 408 68.00
185 - 189 30 33 423 70.50
190 - 194 31 34 439 73.17
195 - 199 32




35
454 75.67
200 - 204 33 470 78.33
205 - 209 34 485 80.83
210 - 214

35
502 83.67
215 - 219 517 86.17
220 - 2224 533 88.83
225 and above 548 91.33

Plug-in Grants

Motorists (private or business) purchasing new qualifying ultra-low emission cars can receive a grant of 25% towards the cost of the vehicle, up to a maximum of £5,000. The scheme also covers new qualifying ultra-low emission vans, where the available grant will be 20% towards the cost of the vehicle, up to a maximum of £8,000. Vehicles with CO2 emissions of 75g/km or less, including electric, plug-in hybrid and hydrogen-fuelled cars, are all potentially eligible for the subsidy. There are strict criteria to be met before specific vehicles can be confirmed as eligible under the rules of the scheme.

Mileage rates

Changes to the HMRC business mileage rates are announced from time to time. The rates from 1 March 2014 are as follows:

Vehicle First 10,000 miles Thereafter
Car / Van 45p 25p
Motorcycle 24p 24p
Bicycle 20p 20p
Car - fuel only advisory rates
Engine Size Petrol Diesel LPG
1400cc or less 14p 12p 9p
1401cc - 1600cc 16p 12p 11p
1601cc - 2000cc 16p 14p 11p
Over 2000cc 24p 17p 17p


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

VED ('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 2014 for cars registered on or after 1 March 2001:

VED Band CO2 emissions (g/km) First year rate Standard 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 £110 £100
E 131-140 £130 £130 £120
F 141-150 £145 £145 £135
G 151-165 £180 £180 £170
H 166-175 £290 £205 £195
I 176-185 £345 £225 £215
J 186-200 £485 £265 £255
K* 201-225 £635 £285 £275
L 226-255 £860 £485 £475
M Over 255 £1,090 £500 £490
* includes cars emitting over 225g/km registered before  23 March 2006

Company vans

The taxable benefit for the unrestricted private use of vans is £3,090. There is a further £581 taxable benefit if the employer provides fuel for private travel.

Van and fuel charge Van Fuel Total
Tax (20% taxpayer) £618 £116.20 £734.20
Tax (40% taxpayer) £1,236 £232.40 £1,468.40
Tax (45% taxpayer) £1,390.50 £261.45 £1,651.95
Employer’s Class 1A NICs £426.42 £80.18 £506.60


The flat rate of £3,090 is reduced to nil for vans emitting zero CO2. There is no fuel benefit for such vans.