Pre-Budget Report Changes

Transport Changes

There are four changes to the car benefit regime from 6 April 2008.

  • Car fuel benefit multiplier increased to £16,900
    The car fuel benefit charge takes the appropriate percentage for car benefit purposes but applies it to a fixed figure, often known as ‘the multiplier’. This figure is increased to £16,900 for 2008-09.

This change was announced in the Pre-Budget Report 2007. The other three changes have been previously announced and also come into effect in 2008-09.

  • New 10% band for 2008-09
    The appropriate percentage for all cars with CO2 emissions up to and including exactly 120g/km will be 10% from 2008-09 (the normal rounding rules do not apply to this band). The cars are called Qualifying Low Emissions Cars, or QUALECs for short. Reductions (e.g. for hybrid or bi-fuel cars) will not apply to QUALECs but the 3% diesel charge will apply as it does to all cars at present. Cars powered solely by electricity are excluded from these arrangements and retain their net appropriate percentage of 9%.
  • New reduction for cars capable of running on E85 fuel
    Cars manufactured to run on E85, a mixture of 85% bioethanol and 15% unleaded petrol, are now coming onto the market. Most cars cannot run on this fuel without damaging their engines.
    From 2008-09 these cars will qualify for a 2% reduction in the appropriate percentage. They will use new letter G on forms P46(car) and P11D.
  • Reduction in lower threshold to 135 g/km for all cars
    The appropriate percentage for cars with CO2 emissions of 121g/km and above is unaffected by the introduction of the 10% band mentioned above, but is affected by the reduction in the lower threshold from 140 to 135 g/km. This reflects continuing improvements in technology.

Rates and Allowances

There were increases to tax allowances and changes to the National Insurance contributions earnings limits and thresholds announced in the Chancellor’s Pre-Budget Report. The new rate of personal allowance which will come into use on 6 April 2008 is £5435 and the code for emergency use will be 543L. Further information can be found on form P9X.

Remember to change your tax codes

You will need to change your employee’s tax codes before the start of the tax year, the instructions on form P9X tell you how to. The P9X can be found on your 2008 CD-ROM, or you can order a paper copy from the Orderline.

New Tax Tables

Following the announced change of tax rates in the 2007 Budget you should use the new PAYE Tax Tables from 6 April 2008. If you use payroll software check to make sure you are using the new tax rates from 6 April. The tax rates are:

  • Under £34,600 - 20%
  • Over £34,600 - 40%

If there are any further changes to the tax rates or tax rate bandwidths they will be announced in the 2008 Budget.