Year End Tax Review 2007 Contents A word to the wise Employee pensions A matter of trust Pension policies Family tax planning Mr and Mrs Inheritance tax Employee cars and fuel Borrowings and tax Tax-free perks Two jobs = too much NIC? Give generously and save tax Children's savings? Company or trade? Capital gains Business tax Investment limits Should VAT be flat?

Employee cars and fuel Employees usually depend on their employers to come up with a tax-efficient pay package. But there are some points which employees should watch out for, in case the employer hasn't noticed. Company cars themselves are taxed on a percentage of their original list price, based on the carbon dioxide emissions rating of the vehicle. The calculation of the benefit has been changing each year to increase the tax on "gas guzzlers" progressively, but at least it's now fixed for a few years to come - the minimum 15% benefit is available on ratings up to 144g/km in up to 2007/08. The main planning point arises if you are due for a change of company car. You may consider whether a lower-rated car would be attractive because of the lower tax charges. You may also think about owning the car yourself and claiming a mileage allowance for business use - the employer can pay 40p a mile tax-free for up to 10,000 miles in a year. On the other hand, the rules are quite favourable for those with a "pure perk" car - minimal business mileage - as long as it has a low CO2 rating. The benefit of having the employer provide free fuel for private motoring in a company car is based on the same percentages as the car benefit, applied to a fixed figure. It's worth checking that the tax you pay to the Revenue isn't more than what you are saving in not paying for petrol. For example, if you have a salary of £40,000 and a company car with a CO2 rating of 170g/km, the tax on a petrol benefit in 2006/07 would be £1,210, and your employer will pay NIC of £387. If your private petrol would cost less than that altogether, it would be cheaper to pay for it than to have it free (hard though that is to understand!). Fluctuations in the cost of fuel make the sums complicated again - because the Revenue's fixed figure doesn't change as quickly. But it's still possible that "free fuel" is actually not a good idea. Action Point! Are you paying more tax than your benefits are worth?