Can company car’s still be tax efficient?

06 November 2013

The way company cars are taxed has changed quite significantly over the years, with the rules now concentrating on CO2 emissions instead of the list price.

The government is trying to encourage more people to be environmentally friendly and consequently the higher the car’s CO2 emissions, the higher your tax bill on the benefit in kind, and the lower the capital allowances that are available for the company.

Capital Allowances

  • For brand new cars with CO2 emissions of 95/km or less =        100% relief
  • If CO2 emissions are between 96g/km and 130g/km =               18% relief.
  • If CO2 emissions are more than 130g/km =                                8% relief.

However fear not, many car manufacturers have cottoned on to the governments tactics and are producing some flash, CO2 friendly cars, for people who can’t quite bring themselves to drive around in a Smart car! Some of the cars available which have 95g/km or less are Lexus CT 200h S, Toyota Yaris Hybrid T3 1.5 WT-I and Volkswagen Polo Bluemotion 1.2 TDI. For more cars in this category please see

Benefit in kind

The car benefit charge for a full year is obtained by multiplying the list price of the car (plus accessories, less capital contributions) by the ‘appropriate percentage’. For example if you buy a Lexus CT 200h which has 87g/km CO2 emissions, the benefit is calculated at a rate of 10% of its list price of £21,995, giving a car benefit of £2,195. This results in a basic rate tax payer paying £439 in tax!

Please contact us if you require any further information.


Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.


  1. Amedar

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