The Income Tax (Earnings and Pensions) Act 2003 (ITEPA) has been amended in accordance with an Autumn Budget 2017 announcement, legislated in Finance Act 2018. This is to do with the company car diesel supplement.

In short:

  • If the company diesel car was registered on or after 01 January 1998 but before 01 September 2017, the 3% supplement that applied increases to 4% with effect from 06 April 2018
  • If the company diesel car was registered on or after 01 September 2017 and does not meet the Real Driving Emissions 2 (RDE2) standard, the supplement is also 4%
  • If the c company diesel car was registered on or after 01 September 2017 and does meet the RDE2 standard, the supplement is 0%

Note that RDE2 may be referred to as Euro standard 6d.  For an explanation of RDE, perhaps the AA Website is the best to refer to.

Payroll Considerations

This will affect employers, agents and software professionals:


For employers that provide diesel company cars that are available for private use, there is an additional step to take when calculating the car benefit.  That is to check whether the car is RDE2 compliant and apply the appropriate diesel supplement (either 4% or 0%).

From September 2018, the Euro standard to which a new car has been certified will be shown on the V5c vehicle registration document.  Plus, the online ‘Vehicle Enquiry Service’ will enable employers to check whether the car is Euro standard 6d and, therefore, not subject to the diesel supplement.

The P46 (Car)

If a P46 (Car) is completed, from the start of tax year 2019/20, a new fuel type ‘F’ will be available on the P46 (Car).  So:

  • F = diesel car that meets RDE2 / Euro6 standard
  • D = diesel car that does not meet RDE2 / Euro6 standard
  • A = any other car (including electric)

If the employer has registered to payroll car benefits, the fuel indicator ‘F’ should be entered in field 177 ‘Fuel type of car you are payrolling’.

Further Information

In addition to the legislation, have a look at the following information and guidance:

  • 22 November 2017 Policy Paper ‘increasing the diesel supplement’ on UK for background information on the reasons for the change
  • December 2018 Employer Bulletin for the above information provided by HMRC



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