The decision on whether to invest in an electric car or one with CO2 emissions up to 110g/km is usually a personal one and tax is rarely much of a consideration even with the generous tax breaks available for greener vehicles.
Example
John Presscut has been given a choice of 3 cars by his employers:
- a VW Polo 1.4 Bluemotion 1 (99 g/km, list price £12,725)
- a Ford Focus Saloon 1.6 Ghia (159 g/km, list price £15,740)
- an X-Type Jaguar 2.6 V6 Sport 5D (239 g/km, list price £25,492)
John recently stood down from his lucrative job with the Government
and is now working as a wine waiter on a cross-Channel ferry, so he
has only been given £10,000 to spend. The cars in this example are
obviously therefore not new.
The VW Polo would qualify for a 100% capital allowance, so his
employers would claim tax relief on the whole £10,000 in the year of
purchase.
The Ford Focus would qualify for an annual 20% written down
allowance on a reducing balance basis, so his employers would need
12 years to claim tax relief on the whole purchase price (assuming
there was nothing else in the general pool).
The X-Type Jaguar would only qualify for an annual 10% written down
allowance on a reducing balance basis, so his employers would need
23 years to claim tax relief on the whole purchase price (assuming
there was nothing else in the special rate pool).
The taxable benefit of each car in 2009/10 would be as follows:
VW Polo - £1,272 (£12,725 x 10%)
Ford Focus - £2,990 (£15,740 x 19%)
X-Type Jaguar – £8,922 (£25,492 x 35%)
This illustrates the huge difference in tax treatment between cars that
are energy efficient, cars that are middle-ranking and cars that suffer
the highest taxation.
It is also worth bearing in mind that energy efficient cars incur lower
rates of vehicle excise duty (VED) and may also be exempt from the
London Congestion Charge.
