Vehicle benefit is levied on all employees earning of £8,500 or more including their benefits and all company directors.
Car Benefit
Car benefits tax is determined by the following attributes:
- the standard list price of the vehicle as at the time it was initially registered,
- the levels of C02 emitted from the car,
- the kind of fuel used by the car
- the beneficiary's highest level at which they pay income tax.
The table below provides details of the chargeable percentage for the tax year 2008/09:
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The following sources can be useful in determining the levels of C02 emissions from a particular vehicle:
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Obtaining factual data on emissions for cars registered prior to 1 January 1998 might be difficult, in which case the following taxable percentages can be substituted:
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Car Fuel Benefits
Car Fuel benefits is levied in all cases except in situations where the employee reimburses the business for all fuel used for non commercial purposes including mileage for home to work.
The figure of £16,900 is multiplied by the percentage of the car benefit for the 2008/09 tax year.
The following illustration shows how the calculation is applied in practice. A cost with a cost of £20,000 for purpose of car fuel benefit is used by an employee for both business and non commercial purposes. This car is petrol driven and emits 226 g/km of C02.
On the basis that the employee is a 40% tax payer, the yearly charge for the provision of the vehicle for private use would be calculated as: £20,000 x 33% x 40% tax = £2,460
Regardless of the frequency, if the employee benefited from using fuel paid by the business, they would suffer a tax charge in 2008/09 of £16,900 x 33% x 40% = £2,230.80.
Company Vans
Where an employee has a company van at their disposal, the chargeable benefit is deemed to be £3,000 for the tax year 2008/09. A charge of £500 would be added where fuel is also by for by the employer.
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In order to avoid the above tax charges, the employee must not make use of the van for private purposes, except for travel between home and work (provided that there is also reasonable business use made of the asset.
