Tax Changes Encourage Green Vehicles

Monday, 6. October 2008

Next year should see an upsurge in contract hire sales as the new tax rules kick in. Professor Peter Cooke of the Centre of Automotive Management at the University of Buckingham (and one of my fellow contributors in Motor Finance journal) warned that the tax changes, to be introduced next year, will have a profound impact on the way that businesses fund their cars. Next year will see the introduction of six new VED (car tax) bands for new cars. Vehicles emitting more than 225g/km of CO2 will cost £425 more to tax. As most people know the road fund licence is usually included in the monthly rentals of a contract hire car. Capital allowance rates will also change in favour of greener vehicles. Only 10% of the value of vehicles emitting more than 160g/km of CO2 will be tax admissible compared to 20% for those that are sub 160. If you are a small business make sure that your accountant gives you some good advice before doing what you’ve always done and buy your next car. By Graham Hill