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A new tax regime covering company cars came into effect on April 6th 2002. Unlike the previous rules, there is no reduction in the tax charge for high mileage. Your company car will be assessed solely on its CO2 emissions and the benefit assessed at between 15-35% of the as new list price.

The lowest level emissions of up to 140 gram/km qualify for the lowest assesment level. Each 1% rise in assesment level above that equates to a 5 gram/km rise in CO2 emissions up to 265 gram/km. Diesel-fuelled cars that fail to meet a Euro emissions standard face a 3% surcharge up to the maximum 35% assesment level. The thresholds are to be tightened by 10 gram/km each year. This means that cars will have to reduce their emissions to remain in the same tax bracket.

If you do drive a company car, this should be accounted for in your new PAYE tax coding. Working out what your company car could cost you is a straightforward calculation, setting the percentage tax figure against the list price of the vehicle to work out the liability. A basic rate taxpayer will pay 22% of that figure while a higher rate taxpayer will pay 40%.

For example, a basic rate taxpayer driving a Ford Focus 1.4CL would have a tax liability of £1,589 (15% of the £10,460 list price) and a tax bill of £345.18. A higher rate taxpayer driving a Porsche Boxster would have a tax liability of £11,007.50 (35% of the £31,450 list price) and a tax bill of £4,403

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