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‘Leaf it out’ on future hike in company car tax

August 31, 2012

ECO-worrying company car drivers wanting to save the world would be advised to turn over a new Leaf when they choose their next vehicle.

For the concerned environmental warriors face a different kind of battle – this time with the taxman.

And the only safe route to maintain their principles – and avoid crippling increases of up to 40 per cent by 2017 to driver tax – is likely to be a handful of all-electric cars on the market today where the Nissan Leaf model leads the field.

Motorists could soon be significantly out of pocket as a result of new legislation set to come into effect, accountants have revealed.

Royal Assent of the 2012 Finance Bill means gradual annual increases to tax liabilities on company cars will now come into play.

Originally the Coalition government’s green agenda had seen company car drivers incentivised to choose more eco-friendly mid-range executive vehicles, helping them to benefit from tax efficient vehicles.

The tax costs of having an executive company car with lower fuel emissions had been significantly reduced. But not any more . . .

Benefits on tax attributable to the carbon-cutting trend will be gradually eroded, as a direct result of HMRC proposals to increase taxation on all company cars.

Company car tax rules state that the individual’s tax liability is dependent upon both the list price of the vehicle and its level of CO2 emissions. Drivers of lower emission cars have been taxed on between 10 – 20 per cent of the car list price.
Higher emission cars were previously subject to a cap of 35 per cent but under the gradual changes, as passed in the Finance Bill, this will increase to 37 per cent. Over time, the CO2 bands will also increase the car values being subject to tax.

This will impact on local businesses which have previously enjoyed tax savings.

But the all-electric zero emission Leaf is a bonus in many directions with its zero car tax, exemption from congestion charges in the UK big cities, allowed to use bus lanes – and no benefit-in-kind tax penalties for the foreseeable future.

It also does a hypothetical 384 miles to the gallon with average running costs of a FIVER a week in its electric energy supply (£257 per annum based on 10,000 miles).

“We advise businesses to review their existing company car policy to make sure that they have the most tax efficient scheme in place – and remember that the Leaf can really help deal with the expected future changes,” said Polesworth garage managing director Martin Newbold.

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