Tax and travel

Car and fuel benefits

The taxable petrol and diesel car benefit is based on the car’s CO2 emissions. It is calculated using the car’s UK list price and applying the ‘appropriate percentage’, as shown in the table on the right. The car fuel benefit is calculated by applying the same percentages to the fuel benefit charge multiplier, which for 2016/17 is £22,200.

From April 2015, the five year exemption for zero carbon and the lower rate for ultra-low carbon emission cars came to an end. Two new bands were introduced for ultra-low emission vehicles (ULEVs). These were set at 0-50 g/km (5%) and 51-75 g/km (9%).

The appropriate percentages for the remaining bands were increased by 2% for cars emitting more than 75 g/km, to a new maximum of 37%.

From April 2016, all the appropriate percentages will be increased by 2%, up to the maximum of 37%. In addition, new European standards which came into force in September 2015 required diesel cars to have the same air quality emissions as petrol cars. The 3% diesel supplement was set to be removed in April 2016. However, it will now be retained until April 2021, when EU-wide testing procedures will ensure new diesel cars meet air quality standards even under strict real-world driving conditions.

The appropriate percentage will increase by 2% for cars emitting more than 75 g/km to a maximum of 37% in each of years 2017/18 and 2018/19.

 CO2 emissions (g/km)
 Appropriate percentage
 Petrol %
 Diesel %
 0 – 50
7
10
 51– 751114
 76 – 941518
 95 – 991619
 100 – 1041720
 105 – 1091821
 110 – 1141922
 115 – 1192023
 120 – 1242124
 125 – 1292225
 130 – 1342326
 135 – 1392427
 140 – 1442528
 145 – 1492629
 150 – 1542730
 155 – 1592831
 160 – 1642932
 165 – 1693033
 170 – 1743134
 175 – 1793235
 180 – 1843336
 185 – 1893437
 190 – 19435 
 195 – 19936 
 200 and above37 

VAT on fuel for private use in cars

Where businesses wish to reclaim the input VAT on fuel which has some degree of private use, they must account for output VAT for which they may use the flat rate valuation charge.

Plug-in Grants

Motorists (private or business) purchasing new qualifying ultra-low emission cars can receive a grant of 35% towards the cost of the vehicle, up to a maximum of either £2,500 or £4,500 depending on the model. The scheme also covers new qualifying ultra-low emission vans, where the available grant will be 20% towards the cost of the vehicle, up to a maximum of £8,000. Vehicles with CO2 emissions of 75 g/km or less, including electric, plug-in hybrid and hydrogen-fuelled cars, are potentially eligible for the subsidy. There are strict criteria to be met before specific vehicles can be confirmed as eligible under the rules of the scheme.

Zero emission vans

As previously announced, the benefit for zero emission vans is to be increased on a tapered basis so that there will be a single van benefit charge applying to all vans by April 2020. For 2016/17 the charge will be 20% of the value of the standard van benefit charge (i.e. £634). There is no fuel benefit for such vans, as set out below.

Company vans

The taxable benefit for the unrestricted private use of vans is £3,170. There is a further £598 taxable benefit if the employer provides fuel for private travel.