The benefit of having a company car is taxed as a percentage of the vehicle’s list price when new. For 2018-19 this percentage will range from 13% for a car with zero CO2 emissions, to 37% for emissions of 180 g/km or more.
Diesel cars tend to have lower CO2 emissions than petrol-powered vehicles of a similar engine size. However, diesels also emit more harmful particles, so a diesel supplement is added to the percentage of list price to increase the taxable benefit of using a diesel company car.
From 6 April 2018 this diesel supplement will increase from 3% to 4%, so the cleanest diesel will be taxed at 17% of list price and those with CO2 emissions of 160 g/km or more will be taxed at 37% of list price.
This tax increase applies only to cars, not to commercial vehicles. The benefit of using a company van for private journeys, other than ordinary commuting, will be taxed at a flat £3,350 per year for both petrol and diesel engines in 2018-19. Drivers of electric vans were taxed on £646 for 2017-18, but this benefit is more than doubling to £1,340 for 2018-19.
Vehicle excise duty (VED) or ‘road tax’ will also be tweaked to discourage the purchase of diesel cars. The VED for new diesel cars registered on and after 1 April 2018 will be charged as if the car was in one band higher. This will add £20 to the VED for the smallest diesel cars, and up to £400 for the largest diesel cars, but it will only have an impact on the VED for the first year the car is registered.