Which Car? 'New company car is a taxing thought'

Andrew Perry, 37, of Southampton, is a rep, paying dearly for driving his company car, a 2.0 Mondeo automatic hatchback. He wants to know what new car he should consider that would double as a family car. He wants a tax-efficient one with bells and whistles, capable of high mileage and carrying samples, teenagers and a dog. Price range £21,000.

Running a company car has become much more complicated in the past few years. The first thing to check is the vehicle's CO2 rating which is now listed as part of a vehicle's specification. If that rating is 165g/km or less, there is a 15 per cent minimum tax charge. If it is more than that for every 5g/km your car emits above that level you have to add 1per cent to the 15 per cent charge. If your car is a diesel you will need to add an extra 3per cent.

But the charge is capped to 35per cent so you may have to reduce the figure. Almost there now, because you need to multiply by the sum of the car's list price which includes all the road tax and delivery charges.

Finally, you can multiply the figure by your income tax rating, now 22 per cent or 40 per cent and that is what your company car tax will be. Phew.

So whether a car is comfy, sexy or handles well hardly matters, because what comes out of the exhaust pipe finally determines what comes out of your wallet. But some cars deliver in many important areas and all for under £21K.

A car for the head

Mr Perry could stick with his Mondeo, maybe going for the roomier estate rather than the hatchback. Also going for the diesel option boosts fuel economy, driveability and most importantly cuts the tax bill.

A 2.0 TDCi 130 is £56 at 22 per cent tax and £102 for 40per cent payers. Although Andrew could get a well-equipped Ghia model I would advise him to get a classier package: a Volkswagen Passat. Again, I would recommend the estate version which is spacious, with plenty of room in the back for children and more than enough in the plush boot area for a dog.

The fixtures and fittings are high-quality and it is all put together well. But the Passat is not the sportiest drive, but that should not bother most buyers who just want a comfortable, safe and reliable vehicle with a strong image which soaks up high mileages without any fuss.

The Passat diesel engine, which is powerful, frugal and refined, is the most important ingredient. The bottom line is that a well-equipped 1.9 Tdi PD 130 SE rates at £63 on 22 per cent tax, or £115 in the 40 per cent band.

A car for the heart

You can have some fun with the tax rules and pay only a nominal amount of tax each month. For instance, the Mitsubishi L200 4Life double-cab would attract just £9 a month for a 22 per cent taxpayer and just £17 a month for 40 per cent payers.

It is a hip and happening vehicle with a saloon-car look and plush double cab combined with a pick-up rear end and an open boot where it is possible to put a dog, or your samples.

On second thoughts it might not be that secure, although you can buy a bolt-on cover. Whether anyone would enjoy tearing up and down the nation's motorways in a big four-wheel drive is another matter.

The other problem is that the tax office are poised to close the loophole that allows anyone to drive a five-seat pick-up while

it is taxed as a van. If you want to drive something special then consider a MG ZT-T 2.0CDTi 135 Tourer which has a very long name and is certainly fun to drive and interesting to look at. A good diesel performer, it is not a massive load-lugger but in tax terms it costs £73 or £132.