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Budget 2016: Number of higher rate taxpayers to fall

Published 16 March 2016

The threshold for paying income tax at a higher rate will increase from £43,000 to £45,000 in 2017, with a plan for it to reach £50,000 by the end of the Parliament in 2020.

It means with inflation remaining low and wage increases being modest, many company car drivers could see themselves falling out of the higher 40 per cent tax bracket, or choosing a more valuable company car and remaining 20 per cent tax payers.

The Government estimates there will be 585,000 fewer people paying the 40 per cent tax rate than at the start of the Parliament.

Benefit-in-kind tax rates had previously been set up to the 2019 tax year, and while there has been no change announced in the 2016 Budget, the Government confirmed it would continue to use CO2 emissions as a basis for the charge, while consulting on further incentives for ultra-low CO2 emissions from 2020-21.

Diesel company cars continue to attract a three per cent supplement on their tax bands, as announced in the Chancellor's autumn statement in November 2015.

Ultimately, there is still a benefit in choosing the cars in your price bracket with the lowest CO2 emissions.

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