THE 3% diesel surcharge on benefit-in-kind company car tax is now to be applied through to 2020/21.

[Note: this is archive material from December 2015. In November 2017 Chancellor Philip Hammond announced the diesel surcharge would rise to 4% from April 2018, along with first-year VED rates for diesels raised by one band].

The 3% diesel surcharge was introduced in 2002 when the current CO2 emissions-based company car system was introduced.

This 3% diesel surcharge took account of the nitrogen oxide and particulate emissions associated with the then standard for diesel engines.

In March 2012 businesses were delighted to hear the Chancellor announce that the surcharge was to be scrapped in four years’ time, from April 2016 thanks to the upgrade to latest technology Euro 6 diesel engines.

With the lead-in time on ordering new vehicles alone, it was understandable that in November 2015 many were unhappy to get less than six months notice that this was not to happen in the Chancellor’s Autumn statement.

Worse – but then again helpful for forward planning – that this 13-year-old surcharge stands for another five years.

What does it mean to me?

• 3% diesel surcharge continues
• So a petrol car and a diesel car with identical CO2 emissions of – say – 105g/km will be in different tax band brackets for 2015/16. The petrol car will be in company car tax band 18, while the diesel car will be in company car tax band 21
• The only exception to the 3% diesel surcharge is for diesel/electric hybrids – in such cases the 3% surcharge does not apply – see our story Yeeha! HMRC says diesel hybrids are exempt from 3% company car tax surcharge