| This 100% first year allowance was introduced in the 2002 Budget, and lasts until 31 March 2008. |
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100% Capital allowances for very low emission cars
This 100% first year allowance was introduced in the 2002 Budget, and lasts until 31 March 2008. The allowance is 100% on the cost of new cars which emit at no more than 120 g/km of CO2, or are electrically propelled.
Benefits in kind on very low emissions cars
In the 2006 Budget, the Chancellor announced that from 2008/09 very low emission cars, those with emissions of no more than 120g/km would attract only a 10% of list price benefit in kind charge, rather than the rate currently applying, which would be 15% for petrol models, and 18% for diesels.
Capital allowances on expensive cars
The Government is likely to announce a change in the way capital allowances are given to businesses that buy expensive cars. The changes will probably include:
linking the rate of allowance given to the CO2 rating of the car – expensive cars tend to have higher CO2 ratings.
expensive cars will be "pooled". In this way tax advantageous balancing allowances when the vehicles are sold will no longer be available.
For both these reasons it is likely that the new system will act as a disincentive for businesses to buy and run expensive cars. Please note that "expensive" for these purposes means costing over £12,000!
Company Vans - from 6 April 2007
Don't forget that from the 6 April 2007 company van drivers who are allowed private use will see a swingeing increase in the benefit in kind tax charge.
Presently van drivers (vehicles under 4 years old) will only suffer a benefit charge of £500 per year to cover private use. From next year this will increase to a benefit charge of £3,000, plus £500 for free private fuel.
We may be coming to a watershed in the way in which relief is given and tax is charged for the use of company vehicles. Now would be an opportune time to review this area and create a new strategy - please call if you would like to discuss this.
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