There are a number of taxes that affect, or could affect, your business’ use of motor vehicles. These taxes aim to encourage you to reduce your vehicle use and emissions. They include:
- road tax (vehicle excise duty (VED))
- fuel duty
- congestion charging
- road pricing.
You can reduce the amount of tax you pay by choosing and operating your vehicles so that they have less impact on the environment.
New cars have fuel economy labels which show how fuel efficient they are. The label shows how much carbon dioxide the car emits and also how much vehicle tax you will have to pay each year. Lower carbon dioxide emissions mean lower vehicle tax and lower running costs.
Road tax
Road tax and the company car tax system are now based on the amount of carbon dioxide emissions that a vehicle produces. You will pay less tax if you use vehicles with lower carbon dioxide emissions. Further information is available from HM Revenue & Customs (HMRC).
Enhanced capital allowances
If you buy a new car for your business that has carbon dioxide emissions of 110g/km or below, or is an electric car, you can claim a 100% first-year capital allowance on the cost of it. This can boost your cash flow. It can also shorten the period it takes to pay back the vehicle’s cost by enabling you to write off the value of the investment against your business’ taxable profits in the first year.
You can check the carbon dioxide emissions of new cars from the Vehicle Certification Agency.
Fuel duty
You could significantly reduce the rate of fuel duty you pay by switching your existing vehicles to run on alternative fuels such as liquid petroleum gas (LPG), bioethanol or biodiesel. You can find out what the latest fuel duty rates are in Budget and pre-Budget reports from HM Revenue & Customs.
Congestion charging and road pricing
Currently, there are relatively few instances of congestion charging and road tolls. However, central government and local councils are considering whether to introduce more widespread charging on motorists.
Keeping your use of vehicles to a minimum will ensure that you are prepared if further costs on drivers are introduced.
Setting up a travel plan could help you reduce the impact of road charging.
