Does your PAYE code include a figure of more than £3,000 for car benefit?

If it does, and you're a 40% taxpayer, the car is costing you at least £100 per month in tax, and in addition to the capital and other costs, it's costing your employer at least £32 per month in employers' national insurance contributions.

The fuel benefit multiplier which has remained unchanged since April 2003 is to increase from the current level of £14,400 to £16,900 from 6 April 2008.

This change will affect employees with company cars and who receive free fuel for private use from their employer. An increase in cost will also be incurred by the employer who will have to pay Class 1A national insurance contributions.

How will this affect you?

The cost in tax of this increase at the higher rate could be as great as £350, while the company faces a cost increase of up to £112. Consider the alternative of buying a car yourself and avoiding the tax/NIC costs - especially if you cover a high business mileage each year. Even if your employer reimburses you at the maximum HM Revenue & Customs rates, both you and your employer can benefit.

We can help you put together the comparative costs and explain where savings could occur.