Pre-Budget Statement - Company Car Drivers

Most company car drivers will find that their benefit-in-kind charge rises slightly - the benefit is charged as a percentage of the list price of the car, the percentage varying between 10% and 35% depending on the vehicle's CO2 emissions. As originally announced as long ago as the 2008 Budget, the charge for most cars will rise by one percentage point from April 2010 (though the maximum will remain 35%).
Where the employer provides fuel for private motoring, the fuel scale charge is calculated as the same percentage of a 'multiplier', which was £16,900 for 2009/10 but which the Chancellor announced will be £18,000 for 2010/11. Thus the scale charge for (say) a car with CO2 emissions of 173 g/km, which was 23% of £16,900 (£3,887) for 2009/10, will be 24% of £18,000 (£4,320) for 2010/11, an overall increase of more than 11%. (This assumes the car is petrol-driven; higher charges apply for most diesel cars.)
The good news is that there will be a nil benefit-in-kind charge for the five tax years 2010/11 to 2014/15 where a director or employee is allocated a company car powered solely by electricity. The paradox here is that, while the electric cars currently available may not be suitable for many business users, it appears (subject to sight of the final legislation) that it will be possible for director-shareholders to take an electric vehicle as a second company car, for use by another family member (for example, a student son or daughter). All the expenses could then be charged to the company, but the benefit-in- kind charge would be nil. And you could, if you wanted, have a third, fourth, fifth . . . . company car.

February 2010