Want to know if the car you lease is good for the environment and your business tax? Both the financing method and the vehicle chosen will determine the tax deductions.

Here's an overview of how the financing option and CO2 emissions can impact costs:

Contract Hire and Finance Lease

 Low CO2 carHigh CO2 car
Cars emitting up to 130g/km

(up to 110g/km from 1 April 2018)
Cars emitting 131g/km or more

(111g/km or more from 1 April 2018
% of lease rental payments that a business can claim against taxable profits 100% 85%

note: the tax treatment only applies to the finance element of a lease. The 15% restriction on high CO2 cars is in place for the duration of the lease.

Contract Purchase and Hire/Lease Purchase

 Ultra-low CO2 carLow CO2 carHigh CO2 car
Cars emitting 75g/km or less

(50g/km or less from 1 April 2018)
Cars emitting between 76g/km and 130g/km (between 51g/km and 110g/km from 1 April 2018) Cars emitting 131g/km or more

(111g/km or more from 1 April 2018)
% of car's capital cost that a business can claim against taxable profits 100% in first year 18% each year on a reducing balance basis. The expenditure is included in the general plant and machinery tax pool 8% each year on a reducing balance basis. The expenditure is included in the special rate pool

note: the tax treatment only applies to the finance element of a lease. The 15% restriction on high CO2 cars is in place for the duration of the lease.

Company car schemes - or benefit-in-kind tax

For employees with a company car, the tax system is based on a percentage of the car's list price graduated according to its CO2 emissions.

The benefit-in-kind tax rates are as follows:

- 5% for cars emitting between 0-50g/km
- 9% for cars emitting between 51-75g/km
- 13% for cars emitting between 76-94g/km

For every additional full 5g/km, the charge increases in 1% steps with an overriding maximum charge of 37% of the car's list price.

note: percentages change on 1 April every year

Vehicles with diesel engines are subject to a 3% supplement compared to their corresponding petrol counterparts. This is also capped at 37%. Cars without an approved figure for CO2 emissions are taxed according to their engine size (in cubic centimetres).

Here to help

Working out the best option for your employees and your business can be confusing. But our experienced and knowledgeable team are on hand to provide advice and guide you through the process. So contact us today on 01903 882 808 or email enquiries@autofunding.co.uk.