Car tax levy could hit SME owners

SME owners and their employees may face a hefty increase in tax and NIC charges when a new emissions scale for company car tax comes into play on the 6^th April 2012.

An income tax charge (and Class 1A national insurance liability [currently 13.8%]) will be applied for the private use of a company car on 10% of the car’s list price where a car has CO2 emissions from 76g/km to 99g/km. For emissions of 100 g/km the rate will be 11% rising by 1% per 5g/km band, to a maximum of 35% (emissions of 220 grams per kilometre or above).

For example the taxable benefit for emissions of 120g/kms is 10%. From 6^th April 2012 this will increase to 15%. That is a 50 % increase in the tax payable. The new charge means that a car with emissions of 120g/kms and a list price of £12,000 used by a 40% taxpayer will face an increased tax liability of £240 calculated as:

List price £12,000 x 5% (being the increase from 10% to 15%) x tax rate of 40%

There will also be a further increase, albeit of just 1% of the list price, for vehicles with CO2 emissions of between 95 and 219 g/km in 2013/14.

It is therefore important to review the company car you either provide as an employer or drive as an employee.

For further information/advice on this topic please visit www.wardwilliams.co.uk