From April 6, 2018, the Scottish Parliament is introducing significant changes to the structure of income tax with a five-band regime. This contrasts with the three-band structure applicable in England, Northern Ireland and Wales.
The net result is that company car drivers living in Scotland will pay more company car tax.
The changes will add a further layer of administrative complexity for businesses.
So what are the tax changes in Scotland?
In Scotland, the basic rate band is effectively being split into three – starter, basic and intermediate – to which is added the higher rate band and the top rate band.
Applicable income tax rates are: 19%, 20%, 21%, 41% and 46%.
It means that middle income – those earning £24,001 and above – and top earners face a 1% rise in income tax versus employees in the rest of the UK. Income tax rates for the remainder of the UK are: 20%, 40% and 45% depending on earnings.
With this income tax increase in Scotland, most company car tax paying drivers resident in Scotland will face larger increases in benefit-in-kind tax than company car drivers in the rest of the UK.
Company car tax rises from April 06, 2018
The start of the new tax year on April 06, 2018, also sees a two percentage point rise in company car benefit-in-kind tax for models with carbon dioxide (CO2) emissions above 75g/km.
The benefit-in-kind rates for cars with emissions of 0-50g/km increase by four percentage points and those with emissions of 51-75g/km by three percentage points.
It means, for example, that company car driver in a 120g/km petrol engined model will see their benefit-in-kind tax bill increase from 23% of the P11D value in 2017/18 to 25% in 2018/19.
Diesel tax supplement rises from 3% to 4%
Additionally, the current company car tax diesel supplement will increase from 3% to 4% for the 2018/19 tax year.
This means a company car driver in a diesel car will face a three percentage point company car tax uplift. The supplement increase is estimated by the government to impact on 800,000 employees and is being applied to all diesel cars that are not certified to the Real Driving Emissions 2 standard; none is currently available.
There are more useful articles on company car tax here
If you want to read more about the company car tax issues raised in this article, the following will be helpful.
- Click here to view the current Company Car Tax Tables
- Click here to view the Company Car Tax Tables for 2020/21
- Click here to read the Editor’s Blog on Future Company Car Tax visibility absent in Spring Statement