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Budget 2007: Car benefit and fuel benefit tax

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22nd Mar 2007
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These amounts are set well in advance, and in the last Budget, the Chancellor announced that from 6 April 2008 the average company car driver would pay a little more tax on his company car as a result of the reduction in the lowest emissions on the car benefit table from 140g/km to 135g/km. This will provide a modest rise in tax for the drivers of average company cars, but of course no rise for the drivers of cars emitting more than the upper limit on the table of 240g/km.Rebecca Benneyworth reports.

This year the announcement is that the rates of benefit in kind will be frozen once again for 2009/10, so there will be no rise in store after 2008 for drivers of company cars.

The announcement also wraps in a change for drivers of E85 cars – that is those that run on a blend of bio-diesel fuel. From April 2008 these cars will be a further type of “alternative fuel” category, attracting a discount of 2% from the amount based purely on emissions. This aligns the treatment of E85 cars with that presently applying to bi-fuel cars – Category B.

There is once again no increase in the base amount used to calculate the benefit in kind on free fuel for private motoring. This remains £14,400, as it was on the introduction of fuel benefit calculations on a CO2 basis several years ago. It is difficult to understand why the Chancellor did not take the opportunity to increase this benefit in the interests of the environment, but one may suppose that the few remaining taxpayers might then go without their free fuel, and leave the Treasury short of a few pounds.

Fuel duty is to be increased by 2p per litre on all fuels from 1 October this year, and by a further 2p per litre in 2008, and 1.84 p per litre in 2009. This will no doubt add to motoring costs by increasing the price of all road fuels, and also non road fuels such as red diesel.

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