For business or company car users Co2 and vehicle leasing go hand in hand. Vehicle emissions form the basis of how a vehicle is taxed. As such, anyone driving a company vehicle must pay company car tax, which is a calculation based on the P11d (recommended retail price), income tax threshold (20/40/45%) and the CO2 of the vehicle (i.e. its emissions).

So why is CO2 so important for a vehicle? There are a number of reasons for this but, for any company car driver, they need to be aware that we are a tax regime which focuses on emissions. The more polluting a vehicle is, the higher the level of taxation you will pay. For example, if you take a purely electric vehicle which emits 0g/km of CO2, then you will pay very little car tax. In contrast, a performance petrol vehicle or a bigger SUV, is likely to emit in excess of 200g/km of CO2 and will therefore result in you paying considerable levels of tax on the vehicle. To help personal and business users, the Government has now created a portal when you can access all the information on vehicles.

You can select an intelligent option for you or your business - https://carfueldata.vehicle-certification-agency.gov.uk

When a company purchases a vehicle (rather than leases), they will claim capital allowances on that asset as part of the tax relief programme. The CO2 of the vehicle will determine how much they claim, for example a car up to 50g/km will allow a 100% 1st year allowance (apart from a leasing company) whereas a car with 111g/km will allows 8% pooled only. For contract hire, the rentals you make against the vehicle are also tax deductible; a vehicle up to 110g/km is 100% allowable BUT anything above this is only 85% allowable. The same calculation applies for any unrelieved VAT too. For the individual driver, websites like ComCar (https://comcar.co.uk) will help show just how the CO2 will influence the level of tax they pay on vehicle based on the CO2. For example, in the 2018/19 tax year, a car emitting 51-75g of CO2 (which would be a PHEV/hybrid) would attract a 19% BiK rate whereas a car emitting 180g/km plus will attract a 37% rate. In 2020/21, a car emitting 160g plus will attract the highest 37% BiK rate. The rules are becoming stricter and stricter.

So what is CO2 on car? In short, this is the carbon dioxide emission which a vehicle produces and which is emitted from the exhaust/tailpipe. A petrol or diesel engine works by way of combustion and therefore this is what the vehicle produces as part of this process. In contrast a purely electric vehicle will commonly use a lithium-ion battery and so will produce no CO2 emissions. The level of CO2 is measured in grams and so the figures are set out as CO2 in grams per kilometre. How is CO2 measured? After a number of high profile scandals, the fuel efficiency and pollutions which a car creates has come under question. The traditional model of laboratory testing under the NEDC rules has now been replaced by the WLTP laboratory tests - see (https://wltpfacts.eu/what-is-wltp-how-will-it-work). Under EU law, this is the new in-depth measure for reviewing vehicles. Also consider that the amount of fuel a car uses is directly linked to its CO2; the more polluting it is, the more fuel-inefficient it is. The new form of testing is aimed to produced more realistic and honest measures of CO2 and fuel efficiency.

Why else is CO2 on a car important? As a member of the EU (currently) we have agreed to form part of a mission to reduce average CO2 on our passenger cars. For example the EU Parliament now want the average CO2 on new passenger cars to be lowered by 15% in 2025 and 35% in 2030. The CO2 reduction will placed on manufacturers across the basis of their averaged mass of vehicle on fleet. In addition, incentives are being offered to help sell zero and low emission vehicles. Will we be diesel/petrol free by 2030? We will soon find out. The pressure on manufacturers and the UK Government is on.

If you would like to know more about any of the points touched on above, please contact a member of our leasing team. Learn more about business and company car leasing in our help and advice pages or be sure to check out our blog for more updates, news and car leasing reviews.

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