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What you need to know: company car schemes and tax liability

A series of measures set to come into force from 2017 will affect the way organisations run company car schemes, possibly costing businesses up to an extra £1,000 per car per year. In the first of a two part series, Matthew Walters, head of consultancy services at LeasePlan, considers critical tax changes for company car schemes

In the last Budget in March, the government extended the freeze on fuel duty for company cars, which is projected to save employees up to £75 per year, and it confirmed that company car tax (CCT) will continue to be based on CO2 emissions. In addition, the 100% tax relief in the first year for businesses purchasing low-emission cars, known as first year allowance (FYA), has been extended to 2021. So far it’s all good news.

What has been less widely publicised is that the CO2 emissions threshold that determines a car’s eligibility for the FYA is being reduced from 75g/km to 50g/km from April 2018. There is also a planned reduction in the CO2 emissions threshold for capital allowances for company cars, which will be dropping from 130g/km to 110 g/km.

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