CHANCELLOR of the Exchequer Gordon Brown launched a cynical back-door attack on the UK's company car users in Tuesday's Budget.

High business mileage drivers will be the worst affected by the new tax regime, which comes into effect on April 6. This will be based on the list price of a company car, and maintains the present business mileage bands, but changes the system of tax reductions completely. In future:

  • Drivers who cover more than 18,000 business miles a year will now pay tax on 15% of the list price of their car, with no further tax break.
  • Drivers who cover between 2,500 and 17,999 business miles a year will pay tax on 25% of the list price of a car, with no further tax break.
  • Drivers who cover fewer than 2,500 business miles a year will be unaffected.
  • Cars which are four or more years old at the end of the tax year will now only qualify for a 25% tax break, not the old 33% break.
  • A new company car tax system will come into effect in April 2002 based on list price (the 35% figure will be scrapped) and graduated according to a car's carbon dioxide emissions.

'I propose a reform to reward the use of fuel efficient company cars and remove today's counter-productive incentive to drive more miles in order to get bigger discounts,' said Brown. 'So I start in this Budget with a measure that will cost the company car user with a typical car around £1 per week.'

He promised the new system for 2002 will be revenue neutral, but hidden in the details of his announcement were plans which will hit company car drivers in the pocket immediately, without offering any incentive to drive fewer business miles - raising revenue without environmental benefit. High business mileage drivers suffer the most. The old tax regime's two-thirds tax reduction for covering more than 18,000 business miles a year equated to benefit in kind tax at 11.67% of a car's list price. This will be 15% from April.

The 3.3% tax rise means a 40% tax payer with a £15,000 car will pay an extra £200 net in tax.

  • For your free ACL guide to how this Budget affects company cars - published in conjunction with Deloitte & Touche - click here.
  • For a direct link to Budget commentary from tax expert Deloitte & Touche click here.
  • For a direct link to the HM Treasury site click here. (Due to volume of traffic, access may be slow.)