Changes to the car benefit rules in 2009-10 and later years

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 help sheet (PDF 88K) and for employers in booklet 480 (PDF 368K).

The following announcements were made at or before Budget 2009. It is possible that further changes will be made for years after 2009 -10 in later Budgets; if so, this information will be updated when any such changes are announced.

Changes to the rules for 2009-10

Disabled drivers

This change only affects disabled drivers who hold a disabled person’s badge (blue badge) and, if they want to drive at all, must drive an automatic as their company car.

From 2009 -10, these employees will be entitled to use the list price (or, if their car has no list price, the notional price) of an equivalent manual car when their car benefit is calculated

Employers

For changes of car from 6 April 2009 onwards, a form P46(car) is no longer required where an employee’s car is withdrawn and replaced with another.

The P46(car) is still required when an employee is provided with a car for the first time, when they are provided with an additional car, or when a car is withdrawn without replacement. As at present, a form is also needed if an employee who has a company car begins to earn at a rate of £8,500 per year.

Changes to the rules for 2010-11

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

Changes to the rules 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 by primary legislation and will therefore not need a reduction
  • 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