COMPANY CAR TAX. OCTOBER 2018.

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1 OCTOBER A GUIDE TO THE OCTOBER 2018 BUDGET FOR FLEET DECISION MAKERS.

2 INTRODUCTION. The Budget on October coincided with significant change to the Plug-in Car Grant scheme for Ultra Low Emitting Vehicles, or ULEVs. Funding is now available only to cars with CO2 emissions of less than 50g/km and a zero-emissions range of over 70 miles, with a reduction from 4,500 to 3,500 per car for eligible vehicles. The Chancellor also announced a consultative review of the impact of the Worldwide harmonised Light-vehicles Test Procedure (WLTP) on the Vehicle Excise Duty (VED) and company car tax systems, which is due to report next Spring. As such, Government has not published applicable BIK tax percentages for company cars beyond 2020/21. Elsewhere, BIK tax rates rise from April , with the lowest BIK tax percentage applying to company cars increasing from 13% to 16%. For diesels, the lowest rate is set at 20%, which includes the 4% tax charge introduced in April For all cars, a Retail Price Index-linked VED rate rise applies on April The previously announced fuel duty freeze for the 9th year in succession is good news for fleet operators and drivers. Had the fuel duty escalator introduced by Government in 2011 continued as planned, a litre of unleaded petrol today would be around 1.70 at the pumps. This MINI Guide to Company Car Tax 2018/19 examines the implications of the 2018 Budget for fleet operators and company car drivers. Disclaimer: The information provided in this Guide is for general information purposes only and is correct to the best of our knowledge at the time of publication (October 2018). While we have made every effort to ensure the information in this document is accurate, neither MINI (UK) Ltd nor the author can be held responsible for any actions or consequences arising from acting on, or refraining from taking any action, as a result of reading this. You should seek your own independent financial advice in relation to any taxation or accounting matters referred to in this document. The values for fuel consumption, CO 2 emissions and energy consumption shown were determined in a standardised test cycle according to the European Regulation (EC) 715/2007 in the version currently applicable and are for comparative purposes for vehicles fitted with standard wheel and tyre combinations. This allows a direct comparison between different models but may not represent the actual fuel consumption achieved in real world driving. CO 2 emissions can change if a different-sized alloy wheel is ordered with the vehicle. This may also lead to a change to the VED payable. More information is available at and at

3 RATES FOR NEW CARS. 2019/20 CO2 FIRST YEAR RATE FIRST YEAR RATE STANDARD RATE STANDARD RATE EMISSIONS (COMPARED FOR DIESEL S (YR2 ON FOR (YR2 ON FOR (G/KM) WITH (COMPARED WITH CARS WITH LIST PRICE CARS WITH LIST PRICE 2018/19) 2018/19) 1 OF 40,000 OR LESS) OVER 40,000) (+ 0) 0 (+ 0) (+ 0) 25 (+ 0) (+ 0) 110 (+ 5) (+ 5) 130 (+ 5) (+ 5) 150 (+ 5) (+ 5) 170 (+ 5) (+ 5) 210 (+ 5) (+ 5) 530 (+ 15) (+ 15) 855 (+ 25) (+ 25 1,280 (+ 40) ,280 (+ 40) 1,815 (+ 55) ,815 (+ 55) 2,135 (+ 55) Over 255 2,135 (+ 65) 2,135 (+ 65) Applies to diesel vehicles that do not meet the real driving emissions step 2 (RDE2) standard. Alternative fuel vehicles receive a 10 annual reduction. 2 All cars with a list price over 40,000 are liable for a 320 supplement for five years following the first year rate, after which the rate reverts to the standard 145 a year. For cars with zero emissions the rate reverts to 0 after five years. New rates apply from April CARS REGISTERED ON OR AFTER MARCH & BEFORE APRIL New car Vehicle Excise Duty (VED) rates are shown in the table (above right). All diesel cars that do not meet the Real Driving Emissions Step 2 (RDE2) standard are liable for increased first-year (or showroom tax ) rates. For cars already registered at March , VED rates are subject to a Retail Price Index-based rise from April as shown in the table (right). First-year rate: Applicable to all new cars in year one, with increased rates for diesels Standard rate (yr2 onwards): 145 cars with CO 2 emissions of 1g/km or over with a list price of 40,000 or less Additional rate (yr2 onwards): 465 cars with CO 2 emissions of 1g/km or over with a list price over 40,000. VED CO /20 BAND EMISSIONS STANDARD RATE (G/KM) (INCREMENT OVER 2018/19) A Up to (+ 0) B (+ 0) C (+ 0) D (+ 5) E (+ 5) F (+ 5) G (+ 5) H (+ 5) I (+ 10) J (+ 10) K * (+ 10) L (+ 15) M Over (+ 15) Figures in brackerts show comparison with 2017/18. *Includes cars emitting over 225g/km registered before March /20 rates apply from April

4 TAXABLE PERCENTAGES OF P11D VALUE AND ALLOWANCE RATES. 2018/19 TO 2019/ /21 CO 2 BIK % BIK % CO 2 ZERO BIK % EMISSIONS 2018/19 ALLOWANCE % 2019/20 EMISSIONS EMISSIONS 2020/21 (G/KM) 2018/19 (G/KM) RANGE (17) (20) 0 All 2 (6) 1-50 Over (6) (9) (12) (16) 1-50 Up to (18) (20) (23) (19) (23) (26) (20) (24) (27) (21) (25) (28) (22) (26) (29) (23) (27) 18/ (30) (24) (28) 8 27 (31) (25) (29) 8 28 (32) (26) (30) 8 29 (33) (27) (31) 8 30 (34) (28) (32) 8 31 (35) (29) (33) 8 32 (36) (30) (34) 8 33 (37) (31) (35) 8 34 (37) (32) (36) 8 35 (37) (33) (37) 8 36 (37) (34) (37) 8 37 (37) (35) (37) 8 37 (37) (36) (37) 8 37 (37) (37) (37) 8 37 (37) (37) (37) 8 37 (37) (37) (37) 8 37 (37) (37) (37) 8 37 (37) (37) Figures in brackets apply to diesels. Diesel hybrids and diesel cars that meet the Real Driving Emissions Step 2 (RDE2) standard are exempt from the diesel tax charge. 1 18% capital allowance applies to vehicles with CO2 emissions of 110g/km or less and 8% applies to vehicles with CO2 emissions of 111g/km or more. On April , the 8% capital allowance reduces to 6%. 2 Measured in miles. Percentages apply from April 6 in Company car BIK tax is based on a car s emissions of CO 2, with the taxable percentages of P11D price applying for 2018/19 to 2019/20 shown in the table (above right). For diesels that do not meet Real Driving Emissions Step 2 (RDE2) standards, a 4% tax charge applies. Currently, however, there are no RDE2-compliant vehicles available. In 2020/21, a new scale with rates ranging from 2% to 14% applying to ultra-low emitting cars with CO 2 emissions of 0-50g/km, applies based on the number of zero emission miles they can cover. A company car tax calculator is available for all MINIs by clicking HERE, while CO 2 emissions information is available at the Vehicle Certification Agency site at Example: BIK tax liability calculation: A new MINI Cooper Clubman City hp 5dr has a P11D price of 19,740 and CO 2 emissions of 131g/km, putting it in the 27% BIK tax band. 19,740 x 27% gives a taxable value of 5,330, equating to yearly BIK tax of 1,066 ( 89/month) for a 20% tax payer, or 2,132 a year ( 178/month) for a 40% tax payer.

5 ALLOWANCES & LEASE RENTAL RESTRICTION. Company cars bought outright are eligible for write-down allowances, where the capital outlay can be offset against tax. The allowance threshold between the 18% main and 8% special rates is based on CO 2 emissions, set at 110g/km in 2018/19. This means that for cars with CO 2 emissions of g/km inclusive, the allowance is 18% a year. For cars with CO 2 emissions of 111g/km or more the allowance is 8% a year, reducing to 6% on April % first year allowance A 100% first-year capital allowance (FYA) applies to cars with ultralow CO 2 emissions with the threshold set at 50g/km, applicable until March Leasing companies are excluded from claiming the first-year allowance. The Chancellor also extended Enhanced Capital Allowances (ECAs) for companies investing in electric vehicle charge points to March Lease rental restriction The amounts payable on company car lease rentals are normally an allowable expense for businesses that can be offset against corporation tax, with the CO 2 emission threshold set at 110g/km. New cars with CO2 emissions of 110g/km or less are eligible for 100% of their lease payments to be offset against corporation tax, while for those with CO2 emissions of 111g/km or more, only 85% is claimable.

6 BUSINESS MILEAGE. PRIVATE CAR. The HMRC mileage allowance payments (MAPs) for business mileage reimbursement in a private car are shown below for 2018/19. The rates are the tax and NIC-free amounts claimable per mile by a driver using his/her own car on business. HMRC MILEAGE ALLOWANCE PAYMENT (MAP) RATES 2018/19. UP TO OVER 10,000 MILES 10,000 MILES All cars 45p 25p The free fuel benefit. BIK tax is payable by drivers receiving employer-provided free fuel for private mileage in their company cars. To work out the tax due, the 2018/19 Government Fuel Benefit Charge (FBC) rate of 23,400 is used. The FBC rises in line with RPI on April Calculating tax due on free fuel. A MINI Cooper Clubman City hp 5dr has CO 2 emissions of 131g/km giving a BIK tax percentage of 27% in 2018/19. Its combined fuel consumption is 48.7mpg. 23,400 x 27% gives a taxable value of 6,318. Multiplying by the driver s marginal tax rate (20% or 40% in 2018/19) gives annual tax payable of 6,318 x 20% = 1,264, or 6,318 x 40% = 2,527. With the average price of petrol at 5.97/gal or 1.31/litre (October 2018), 1,264 will buy 211 gallons (959 litres) for a 20% tax payer or 423 gallons (1,923 litres) for a 40% tax payer. Multiplying by the MINI s combined fuel consumption figure of 48.7mpg gives 10,275 miles for a 20% tax payer, or 20,600 miles for a 40% tax payer the minimum private mileages you need to cover to make the free fuel benefit worthwhile. If you drive fewer private miles than the calculated figures you will be better off paying for private fuel yourself. On the other hand, if you drive more private miles than the calculated figures you are better off paying the tax.

7 NATIONAL INSURANCE CONTRIBUTIONS. Class 1A National Insurance Contributions are payable by the employer on the company car benefit and employer-provided free fuel for private use at the rate of 13.8% of taxable value. For the free fuel calculation in 2018/19 fuel benefit charge rate of 23,400 applies to the car s taxable value. The FBC rises in line with the Retail Price Index on April Calculating Class 1A NIC cars. A MINI Cooper Clubman City hp 5dr, with a P11D price of 19,740 and CO 2 emissions of 131g/km, attracts a tax charge of 27% of its P11D value in 2018/19. 19,740 x 27% gives a taxable value of 5,330. Multiplying by 13.8% derives the annual Class 1A NIC contribution due 736. Calculating Class 1A NIC free fuel in 2018/19. Multiplying the fuel benefit charge (FBC) figure of 23,400 by the MINI Cooper Clubman City hp 5dr s 27% tax charge gives a taxable value of 6,318. Multiplying by 13.8% derives the annual Class 1A NIC due 872. For further information on Class 1A NIC on car and fuel benefits, click HERE.

8 GOVERNMENT PLUG-IN CAR GRANT FOR ULEVs. The Government Plug-in Car Grant (PiCG) for ultra-low emissions vehicles (ULEV electric or part-electric cars that emit 75g/km of CO 2 or less) is available only to cars with CO 2 emissions of less than 50g/km and a zero-emission range of over 70 miles. The grant rate is 3,500 per car, reduced from 4,500 which applied to previous Category 1 cars. Previous Category 2/3 cars are now ineligible for the grant. All ULEVs remain eligible for the Electric Vehicle Homecharge Scheme (EVHS) grant, even if they do not qualify to receive the PiCG. The EVHS covers up to 75% of the cost of installing a charge point at home, capped at 500 inc VAT. Enhanced Capital Allowances (ECAs) are also available for companies investing in electric vehicle charge points, with the allowance extended until March Government ULEV grant availability. PiCG eligibility: cars with CO 2 emissions of less than 50g/km and a zero-emission range of over 70 miles receive a grant of 3,500. For more information about the Government PiCG grant scheme, click HERE. Go to for a full list of granteligible vehicles.