Cars and fuel

When a car is made available to an employee and is available for private use, the employer must submit form P46 (Car) available from the HMRC website

The provision of a car which is ‘available’ to an employee (whether used by him or not), represents a taxable benefit. Car benefits vary according to the size and fuel efficiency of the car; they range from 10% for a car with emissions of 120gm/km to 35% for a petrol car with CO2 emissions of 235gm/km or a diesel car with CO2 emissions of 220gm/km. Details of changes from 2011-12 are available on the HMRC website

The percentage is applied to: [list price of car + value of any optional extras] X percentage based on the car’s CO2 emissions. 

Note: it is the list price that is used and not the actual price, although there is an overall limit of £80,000 on the price of the car, either list or optional price.

An exception to this is the case of a classic car; market value is substituted where the market value is at least £15,000 and exceeds the price.

If a car is unavailable for any part of the year, the benefit charge is reduced accordingly. Any contribution by the employee will also reduce the chargeable amount.

An employee was provided with a car by his employer, but was required to pay for insuring the car. He was assessed on car benefit and appealed, contending that the insurance payments should be deducted in computing the car benefit. The court rejected this and upheld the assessment, holding that the only deductions available would be for the car itself rather than insurance. [CIR v Quigley CS 1997, 67 TC 535].

Changes from 6 April 2011

  • There will be three letters to describe cars: E (electric), D (diesel) and A (all others);
  • there will no longer be reductions for alternative fuels;
  • the diesel surcharge will apply to all diesels, whenever registered;
  • the £80,000 limit for the price of a car will no longer be applied;
  • the threshold for CO2 emissions will be reduced from 130g/km to 125g/km;
  • the lowest appropriate percentage is 0 per cent and applies to cars with CO2 emissions of zero;
  • cars with CO2 emissions of less than 75g/km have an appropriate percentage of 5 per cent;
  • cars with CO2 emissions of 76g/km to 120g/km have an appropriate percentage of 10 per cent and thereafter the rate is 15 per cent increasing by1 per cent for every 5g/km to the current maximum of 35 per cent for emissions of 225g/km and above.

From 6 April 2012

  • The special rules for QUALECs (qualifying low emissions cars), with CO2 not exceeding 120g/km will be abolished;
  • the lower threshold (CO2 emissions figure which sets the 15% rate) will reduce from 125g/km to 129g/km;
  • the lowest appropriate percentages remain 0% and 5% but 10% will only apply up to cars with an emissions level up to 99g/km. From 100g/km the rate is 11%, rising by 1% for every 5g/km to the current maximum of 35% (emissions of 220g/km).

From 6 April 2013

  • The lower threshold will be reduced from 120g/km to 115g/km;
  • the lowest appropriate percentages remain 0% and 5%. 10% will apply to cars with CO2 emissions of 76g/km to 94g/km;
  • the appropriate percentage will increase by 1% for all vehicles with emissions between 95g/km and 215g/km to a maximum of 35%.

From 6 April 2015

The appropriate percentage for zero emission cars reverts to 9%. The special rules for cars with CO2 emissions not exceeding 75g/km will be abolished.