Budget 2016: CO2-based company car tax to remain until 2021
Following the Autumn Statement’s extension of the 3% Benefit in Kind levy for diesel vehicles in the wake of the Volkswagen Group emissions scandal, there had been concerns that the Government would change its tactic this year.
Instead, the Budget sets out new capital allowances for business cars effective from April 2018, with a main rate (18%) threshold reduced from 130g/km to 110g/km. From the same date, the 100% first-year allowance threshold will also be tightened to vehicles emitting 50g/km or less, down from 75g/km, and this has been extended to 2021.
Said to reflect the falling emissions of new cars, the revisions are predicted to raise £155m in revenue by the end of the 2020/21 tax year. The Budget says company car tax will continue to be based on CO2 emissions, and consultations will take place before 2021 to devise new bands which incentivise the cleanest cars.