Skip to content



Company cars and vans


The measure

Company cars: downwards revision of company car tax bands

The graduated table of company car tax bands will be restructured from 6 April 2012 such that the 10% band applies to petrol company cars with CO2 emissions of 99g/km and below. The bands increase at 1% intervals for each additional 5g/km of CO2. The 3% diesel supplement still applies. Qualifying Low Emission Cars (QUALECs) will therefore no longer exist as a separate category.

Company cars and vans: tax on receipt of free private fuel

The figure used as the basis for calculating the tax charge on the benefit of private fuel received by an employee in a company car is to be increased from £16,900 to £18,000 from 6 April 2010. The figure used as the basis for calculating the tax charge on the benefit of private fuel received by an employee in a company van is to be increased from £500 to £550.

Electric company cars and vans: zero tax on benefit of private use

The percentage figure used to calculate the benefit in kind of an electric car/van will be reduced to 0% for five years from 6 April 2010. This is effectively a tax free benefit.

Electric vans: 100% first-year capital allowances

Subject to confirming compatibility with the State aid rules, legislation will be introduced to provide a 100% first-year allowance for business expenditure on new (not second hand) electric vans from 1 April 2010 (corporation tax) or 6 April 2010 (income tax).

Note: where the term "electric" is used above, this is intended to describe a vehicle which is propelled solely by electricity and is not a hybrid.

Who will be affected?

  • Employees/directors provided with:
    • a company car for their private use;
    • an electric company car or van for their private use; or
    • an electric company van for their private use.
  • Employees/directors who receive free private fuel from their employers for company cars or vans.
  • Businesses that:
    • purchase new electric vans;
    • bear Class 1A National Insurance Contributions (NICs) on the taxable status of the benefits above.
Our view

The exemption from income tax and NI for electric vehicles should prove a significant incentive for employers to provide these vehicles and, in turn, encourage a wider variety of such models to be made available in the UK. This, in conjunction with the tightening of the emissions thresholds for benefit-in-kind tax and the increase in the fuel benefit tax, continues the trend by Government to use the tax system to encourage businesses and drivers to select greener, low emission vehicles.

We anticipate that further announcements will clarify whether an exemption to the fuel scale benefit will be available, where electricity is provided by the employer to charge electric vehicles which are then used for private journeys.

We believe these changes are positive news and should provide a further incentive for employers to assess their current fleet, the policy and its true after-tax cost; and ensure they maximise the use of the tax incentives provided by the Government.