From 6 April 2002, the Company Car Tax system, based on 35 per cent of the car's price, subject to business mileage and age-related discounts, was abolished. The Government now bases the tax charge on a percentage of the car's price graduated according to the level of the car's carbon dioxide (CO2) emissions.

The starting point for calculating the tax payable remains the car's price. The charge is based on a percentage of that price graduated according to the car's carbon dioxide (CO2) emissions measured in grams per kilometre (g/km). The exact CO2 figure is rounded down to the nearest 5g/km for company car tax purposes.

Cars emitting CO2 at or below a specified level are taxed on 15 per cent of the car's price (the usual minimum charge). This qualifying level of CO2 emissions will gradually be reduced over the first few years of the reform, reflecting anticipated improvements in the fuel efficiency of new cars. The level of CO2 emissions qualifying for the minimum charge is as follows: 2002-03 165g/km CO2, 2003-04 155g/km CO2, 2004-05 145g/km CO2, 2005-06 140g/km CO2, 2006-07 140g/km CO2, 2007-08 140g/km CO2.

Also from 6 April 2003, the tax incurred when the employee is provided with free fuel for personal use is calculated differently. Whereas before the tax corresponded to the annual mileage, the new cost is calculated by the CO2 emissions percentage (see above) multiplied by a set figure for the year. For 2003-04 to 2005-06 this figure is £14,400.

Since figures for 2006-07 and later years have not yet been set, the charge shown will be an estimate based on previous years' figures.