HMRC data shows company car tax collected by the Treasury increased by more than £360m year-on-year (24%) in 2016/17.
The HMRC figures show that - despite the number of employees paying the benefit-in-kind (BIK) tax falling from 960,000 to 940,000 this year (-2%) - the Government is raising record revenues from higher taxes on company car drivers.
National insurance contributions (NICs) on company cars also rose during this period, with £630m paid by employers in 2016/17 compared to £600m the previous year, an increase of 5%.
Collectively, BIK tax and NICs were worth £2.48bn compared to £2.09bn in 2015/16, an increase of 19% (or £390m) for the Treasury.
In 2012/13, for comparison, BIK and NICs were worth £1.75bn – this is about £730m less than currently, although the number of employees with a company car stood exactly the same at 940,000.
With the record figure of £2.48bn, the average annual tax yield on a company car was £2,638 in 2016/17, a 22% or £471 year-on-year increase from 2015/16.
The increased tax take between 2015/16 and 2016/17 can be partly explained by the reported rise in the taxable value during the same timeframe, up to £4.57bn from £4.32bn in HMRC figures.
A significant amount of the increased revenue can be attributed to the annual two percentage point increase on BIK rates introduced in 2015-16 (previously increases were capped at one percentage point).
Further analysis of the 2015/16 data shows that the annual average company car tax was £1,869 (or £164 per month) – 27% higher than the £1,552 (£129 per month) paid in 2015/16.
The increased revenues were unaffected by a rise in company car drivers choosing lower CO2 models, with the number of company cars emitting 134g/km of CO2 or less increasing by 77% between 2014-15/2015-16.
HMRC claims that its emission-dependent scale of percentages for company car tax rates is just one of many factors incentivising the manufacture and purchase of low emission vehicles.
With the transition to the new WLTP (Worldwide harmonised Light vehicle Test Procedure) emissions testing standard by this September, it is estimated that the Treasury could boost its tax collection from company cars even further.
Industry analysts suggest that CO2 figures derived from the new test (designed to replace the New European Drive Cycle or NEDC) may register emissions up to 30% higher. These tests will not apply to first-year vehicle excise duty (VED) and company car tax until April 2020. However, fleets that have undergone the new test have reported new values which are 10% higher on average – more than enough to put some cars into higher BIK tax brackets.