The car benefit charge for a full year is obtained by multiplying the price of the car for tax purposes (in most cases, its list price plus accessories less capital contributions) by the ‘appropriate percentage’. A more detailed guide is available for employees in the HS203 Self Assessment helpsheet and for employers in booklet 480.

This page records changes to the car benefit rules which take effect from 2010–11 onwards. It will be updated as further announcements are made, though it will not be possible to do so immediately after an announcement is made, whether at Pre-Budget Report or Budget.

Changes from 2010–11

The lower threshold (the CO₂ emissions figure which sets the 15 per cent rate) is reduced from 135 to 130 g/km.

The appropriate percentage for cars powered solely by electricity is reduced to 0 per cent for five years.

Changes from 2011–12

The car benefit rules will be significantly simplified from 2011–12. From 6 April 2011:

• There will no longer be any reductions for alternative fuels (hybrids, bi-fuels and cars manufactured to run on E85 – types H, B and G).
• The diesel surcharge will apply to all diesels (including type L diesels approved to Euro IV emissions limits and first registered before 1 January 2006).
• Electric cars will still have an appropriate percentage of 9 per cent, but this will be given directly in primary legislation. The temporary reduction to 0 per cent until 2014-15 will continue to be given by secondary legislation.
• The £80,000 limit for the price of a car for car benefit purposes will no longer apply.
• The lower threshold (the CO₂ emissions figure which sets the 15 per cent rate) will be reduced from 130 to 125 g/km.
• The number of letters used to describe cars will therefore be reduced to three: E for electric-only cars (as at present), D for all diesels (current types D and L) and A for all other types (current types H, B, C, G, P).

Changes from 2012–13

The special rules for QUALECs (qualifying low emissions cars, those with CO₂ emissions not exceeding exactly 120 g/km) will be abolished.

The lowest appropriate percentage will still be 10 per cent, but will apply to cars with CO₂ emissions of up to 99 g/km. The rate for emissions of 100 g/km will be 11 per cent and will increase by 1 per cent for every 5 g/km to the current maximum of 35 per cent, as at present.

Changes from 2015–16

The appropriate percentage for cars powered solely by electricity reverts to 9 per cent unless this figure is changed in any future announcement.

Source: HMRC. www.hmrc.gov.uk. Copyright Acknowledged.