THERE have been remarkable reductions in car tailpipe emissions in recent years. The market has been ‘pushed’ by European legislation, ultimately requiring manufacturers to sell cars with average CO2 emissions of 95g/km by 2020 and ‘pulled’ by individuals and organisations seeking to reduce motoring costs through improved fuel economy and lower taxation.
Over the last three years, 120g/km CO2 has become the low emission benchmark – with good reason: it’s a key tax break below which company car drivers benefit from a lower 10% benefit in kind company car tax rate (13% for drivers of diesel company cars).
The cars available below this threshold have also increased both in number and in the range of available body styles: 120g/km and below is no longer the preserve of the city car. A typical example of the expansion in this sector is the Saab 9-3 which is now available with an 180hp diesel engine emitting 119g/km. According to the Comcar website, more than 700 car models are available with CO2 emissions of 120g/km or less.
The benefits of choosing a lower emission car
Assuming the most efficient cars in class have been chosen, this remarkable progress has allowed businesses to benefit through lower National Insurance class 1A contributions and reduced Vehicle Excise Duty. Drivers are also able to benefit through lower Company Car Tax (CCT) payments and the lower fuel costs can be a benefit for both employers and employees alike. Don’t forget the enhanced capital allowances are available on low emission cars too (those with emissions below 110g/km CO2).
Progress inevitably leads to change
Benchmarks change, however, and an important one is changing soon. From April 2012 the lowest BIK scale charge of 10% of the cars P11D value for petrol and 13% for diesel will be based on emissions of 99g/km, with an incremental scale increasing by 1% for each additional 5g/km CO2 produced. The scale charge for a 120g/km CO2 emitting car rises therefore from 10% to 15% for petrol cars and 13% to 18% for diesel.
Admittedly, the scale charge will be 1% lower for a 119g/km car; still these are significant changes which deserve scrutiny as illustrated by the following example of a typical diesel hatchback or estate such as a VW Golf with a P11D value of £18,000 and an official CO2 emissions figure of 119g/km.
The rising cost of tax
| Tax year | P11D scale | Class 1 NIC* | CCT @ 20% | CCT @ 40% |
|---|---|---|---|---|
| 2010-11 | 13% | £300 | £468 | £936 |
| 2011-12 | 13% | £323** | £468 | £936 |
| 2012-13 | 17% | £422 | £612 | £1,224 |
* Class 1A National Insurance payments are calculated as the employer NI rate for the year multiplied by the P11D price of the car (this is the cash equivalent of the car as calculated at Part F of the P11D and is based on the list price of the car, plus any accessories, multiplied by the relevant percentage determined by the vehicle emissions).
**NIC rate increases from 12.8% to 13.8% from April 2011; example assumes no further change for 2012/13.
The increase in employer National Insurance contributions in 2012/13 over 2010/11 is almost 41% and for the driver, company car tax increases by almost 31%.
Back to city cars?
As noted earlier, only three years ago most cars with CO2 emissions of 120g/km or less were small vehicles, with notable exceptions such as the Toyota Prius and Honda Civic IMA hybrids. For those businesses seeking to benefit from choosing the most efficient cars, what is available today and in the near future?
Refinements to diesel engine technology and engine stop/start systems are steadily increasing the choice in the business hatchback class (VW Golf/Ford Focus), and Volvo is offering low emission DRIVe versions of the C30 Coupe, S40 saloon and V50 estate models with emissions of 99g/km. Diesel electric hybrids will also be on sale in 2011. The Peugeot 3008 Hybrid4 features four-wheel drive and promises CO2 emissions of 99g/km.
Petrol powered cars are becoming more economical, too; smaller capacity engines with improved control of fuel and valve timing and frequently incorporating turbo or supercharging are being developed. FIAT has a petrol 500 model with emissions as low as 92g/km, too. The petrol electric hybrid is becoming mainstream too with Toyota introducing the Auris with emissions from 89g/km.
These examples are not at all exhaustive with Audi, Citroen, MINI, Peugeot, SEAT, Skoda and smart also selling cars with emissions below 100g/km.
Mixed economy
Adding Pure Electric cars into the equation, which will start to appear on the road in 2011 and Plug-In Hybrid Electric Vehicles a year or so later, the future of motoring can appear confusing. What is certain is that choice of car won’t be limited, and by making the right decisions businesses will be able to minimise future increases in the cost of business travel, while limiting their impact on the environment.
Further information
The Energy Saving Trust provides advice for you and your company car fleet through experienced transport consultants who can help you choose the right vehicles for your organisation and provide practical advice on more general vehicle management issues. Telephone 0845 602 1425 and get help from the Energy Saving Trust to help you operate an efficient, cost effective and greener fleet.
If you would like to download a free factsheet on company car tax bands, then click on the highlighted link: Company Car Tax Tables, 2010-2013.
