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Diesel vehicles are regarded as being more fuel-efficient than petrol models, but they are taxed at higher rates as their NOx emissions are more harmful.

If you are considering a new company or privately owned car, take account of the following tax penalties for diesels.

The rate of vehicle excise duty (VED) for cars registered on and after 1 April 2018 will be higher in every band for diesel cars, but only for the first year of registration.

From 6 April 2018 the percentage of list price (used to calculate the car benefit) carries a 4% supplement for diesel cars, increased from 3%.

For most petrol company cars, the percentage of list price will rise by two percentage points in 2018/19, but it will rise by three points for diesels, and four points for electric cars. From 2018/19 to 2019/20 the percentage rises by three points for all cars, up to a maximum of 37% of list price.

Say your employer provides you with a diesel-powered car costing £30,000 (CO2:110g/km). The taxable car benefit is £7,200 (24% x £30,000) in 2017/18, but in 2020/21 the taxable benefit for the same car will be £9,300 (31% x £30,000).

The taxable benefit for pure electric cars will jump from 9% of list price in 2017/18 to 16% in 2019/20; it is then due to fall back to 2% in 2020/21.

Action Point!
Budget for the tax due on your company car in future years.

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Clarke Nicklin House, Brooks Drive, Cheadle Royal Business Park, Cheadle, Cheshire, SK8 3TD. Registered Number OC309225.
The firm is registered to carry on audit work in the UK & Ireland. Details about our audit registration can be viewed at www.auditregister.org.uk under reference number C001178544. The professional rules applicable are the Audit Regulations and Guidance which can be found at www.icaew.com/regulations, and the International Standards on Auditing (UK and Ireland) which can be found at www.frc.org.uk/apb/publications/isa.cfm.