Fleet News

Changes could double tax for essential users

ESSENTIAL company car users would suffer and perk car drivers benefit if the Inland Revenue were to change the business mileage discounts in the current company car tax regime. This levies a benefit charge of 35% of a car's list price on drivers who cover fewer than 2,500 business miles a year; 25% of list price on drivers who clock up between 2,500 and 18,000 business miles; and 15% of list price if they exceed 18,000 business miles.

The Government has indicated that it will retain the 35% figure as a maximum, but is keen to discourage unnecessary journeys by drivers trying to cross the mileage thresholds. By reducing the upper tax threshold of 35% of list price to 32% and then 30%, the Inland Revenue would encourage so-called 'perk' drivers to keep their company cars, rather than swap them for a cash allowance. A higher rate taxpayer with an Audi A4 1.9 TDI SE, for example, would see his company car tax fall from today's £2,962 (£21,164 x 35% x 40%) to £2,708 a year and then £2,540 by the 2001/02 tax year.

Under the proposed carbon dioxide-based system scheduled for April 2002, the Audi's benefit charge would fall to £3,810, leading to an annual tax bill of just £1,524, a saving of £28 per week compared to the present regime. The outlook is bleaker for the two thirds of company car drivers who cover between 2,500 and 18,000 business miles a year, and who could see the middle tax threshold rise from 25% of list price to 28% and then 30%.

But the main brunt of the rumoured tax changes would be essential car users clocking up more than 18,000 business miles a year. Insiders suggest their annual company car tax bill could double over three years, from 15% of list price to 20% and then 30%.These drivers have already suffered a 28% increase in tax in the current financial year, and to remain neutral over the next three years they will have to swap to a car half the price of their current vehicle.

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