Tax and Your Company Car

Tax Company Car.jpg

There are many factors which will influence your choice of company car. These can include the distance you travel, terrain covered, the price, your lifestyle and perhaps even your clients. However, is tax ever a consideration?

The start of the tax year saw an increase in the company car rates and indeed the rates are increasing quite significantly year on year. Assuming however that you have some degree of choice over the car make and model, you can influence the tax that you pay.

The two factors which determine the tax charge attached to a company car are the list price of the vehicle and its CO2 emissions.

The table below shows the benefit in kind charge for cars with various, hypothetical,  list prices and CO2 emissions.  The rates applicable to the current tax year (2017/18) have been used.

List price CO2 emissions Fuel type Benefit in kind value
£17,000 102g/km Petrol £3,230
£25,000 99g/km Petrol £4,500
£25,000 117g/km Diesel £6,250
£35,000 0g/km Electric £3,150
£50,000 41g/km Electric/Petrol £4,500
£50,000 155g/km Diesel £16,500

In addition to the company car benefit there is also a fuel benefit if the employer provides fuel for private use; the value of the fuel benefit is affected by the CO2 emissions but not by the list price.

Although tax will not be the only issue affecting your choice of company car, perhaps it ‘auto’ be a consideration?

If you’d like any more information please contact Green & Co Accountants.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

100% First Year Allowances on Low Emission Cars Extended

ID-10021166Up until 31 March 2015 it was possible for businesses to claim up to 100% of the cost of cars purchased for use in the business if they had CO2 emissions of 95g/km or less.

This is known as first year allowances (FYA) and HMRC have extended the deadline for claiming FYA on low emission cars, from 31 March 2015 to 31 March 2018. However, the regulations have also lowered the permitted limit of CO2 emissions for qualifying cars, so from 1 April 2015 cars must have CO2 emissions of 75g/km or less in order to qualify for FYA.

Another advantage of cars with low CO2 emissions is a lower benefit in kind charge, as an employee’s company car benefit is based on list price and CO2 emissions.

It just goes to show – the future isn’t orange, it’s green!

For more information please contact Green & Co.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Image courtesy of Paul at FreeDigitalPhotos.net

A Tax Efficient Company Car

In recent years the government has changed the way that company cars are taxed. They have been trying to encourage more people to be environmentally friendly. Consequently, the higher a car’s CO2 emissions, the higher your tax bill on the benefit in kind, and the lower the capital allowances that are available for the company.

With this in mind, Mitsubishi has recently launched the Plug-in Hybrid Electric Vehicle (PHEV) version of its all new Outlander. This vehicle comes with some impressive green credentials, only producing CO2 emissions of 44g/km and achieving a mightily impressive 148mpg.

The fact that this vehicle has such low emissions makes it the ideal company car.

In the year of purchase, the company would be able to claim back 100% of the cost of the vehicle against its tax bill.

The benefit in kind rating against the employee is only 5%. This means that an employee paying tax at basic rate would only pay £596 in tax for the use of the vehicle and fuel purchased during the year. As you can see from the table below this easily outstrips its nearest rivals:

Tax payable on benefit Mitsubishi Outlander GX4h Auto BMW X3 Xdrive SE Auto Audi Q3 S-Line Plus Auto Mercedes E-Class SE Estate Auto
At basic rate £596 £2,575 £3,040 £2,770
At higher rate £1,192 £5,150 £6,080 £5,540

If you currently live in London or travel there frequently, there is also the additional good news that the Outlander PHEV is registered as congestion charge exempt, allowing you to travel through London free of charge.There are also grants currently available on the purchase of this vehicle. You will be able to get a grant of £5,000 against the initial cost of the vehicle. British Gas are also currently able to install high speed chargers at your home, so that you would be able to take advantage of cheap Economy 7 electricity by charging your vehicle overnight.

Do you have any queries about company cars? Here at Green & Co, we are more than happy to help you.

Should you wish to read more about the new Mitsubishi Outlander PHEV, please visit the website.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

The Tax Efficient Company SUV – Mitsubishi Outlander PHEV

In recent years the government has changed the way that company cars are taxed. They have been trying to encourage more people to be environmentally friendly. Consequently, the higher a car’s CO2 emissions, the higher your tax bill on the benefit in kind, and the lower the capital allowances that are available for the company.

With this in mind, Mitsubishi has recently launched the Plug-in Hybrid Electric Vehicle (PHEV) version of its all new Outlander. This vehicle comes with some impressive green credentials, only producing CO2 emissions of 44g/km and achieving a mightily impressive 148mpg.

The fact that this vehicle has such low emissions makes it the ideal company car.

In the year of purchase, the company would be able to claim back 100% of the cost of the vehicle against its tax bill.

The benefit in kind rating against the employee is only 5%. This means that an employee paying tax at basic rate would only pay £596 in tax for the use of the vehicle and fuel purchased during the year. As you can see from the table below this easily outstrips its nearest rivals:

Vehicle Mitsubishi Outlander GX4h Auto BMW X3 Xdrive SE Auto Audi Q3 S-Line Plus Auto Mercedes E-Class SE Estate Auto
Tax payable on benefit £596 £2,575 £3,040 £2,770

If you currently live in London or travel there frequently, there is also the additional good news that the Outlander PHEV is registered as congestion charge exempt, allowing you to travel through London free of charge.There are also grants currently available on the purchase of this vehicle. You will be able to get a grant of £5,000 against the initial cost of the vehicle. British Gas are also currently able to install high speed chargers at your home, so that you would be able to take advantage of cheap Economy 7 electricity by charging your vehicle overnight.

Do you have any queries about company cars? Here at Green & Co, we are more than happy to help you.

Should you wish to read more about the new Mitsubishi Outlander PHEV, please visit the website.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

To Have A Company Car Or Not – That Is Indeed The Question

When it comes to the question of whether one should have a company car or take a car allowance instead, most people are unsurprisingly confused. As company car benefits keep increasing, so does the tax burden. So is it more beneficial? Or should you, if your Employer provides for it, take a car allowance instead?

The conclusion is that a company car is going to be more tax efficient in the following two circumstances:

  • The car has low CO2 emissions coupled with a low level of business mileage.

For example:

Car CO2 emissions 123g/km   List price of car when new  £11,360

Car benefit for 2013/14     – 16% x £11,360  = £1,817

Assuming higher rate taxpayer  – tax due £1,817  @ 40% = £722

If the private mileage in the year is 10,000 miles this equates to tax per mile at 7.22p (722 ÷ 10,000). Based on “What Car” figures of 12,000 miles per annual total mileage over 3 years, the true cost per mile is 32p, providing a saving of 24.78p.

  • The second scenario occurs when business mileage is high, resulting in a tax deductible car allowance which does not cover the true business cost.

Example:

Car CO2 emissions  264g/km   List price of car when new £67,050

Car benefit for 2013/14   – 35% x £67,050 = £23,467

Tax due @ 40% = £9,386

On business mileage of up to 10,000 pa, an allowance at 45p per mile could be claimed resulting in a total claim of £4,500. The real cost according to “What Car” is £15,289.

After 10,000 miles the rate reduces to 25p per mile, so if the business miles were 20,000 the amount claimed would be just £7,000 whereas the true cost is £24,000 – again according to “What Car.”

Each case needs to be looked at independently, based on the type of car being provided and the private and business miles being run. In the circumstance of an employee being offered a car allowance, if they use their own car this will also have a bearing on the outcome. The answer is not always straightforward, but then when has anything to do with tax ever been!!

Should you require any further details please contact Green & Co.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Can company car’s still be tax efficient?

The way company cars are taxed has changed quite significantly over the years, with the rules now concentrating on CO2 emissions instead of the list price.

The government is trying to encourage more people to be environmentally friendly and consequently the higher the car’s CO2 emissions, the higher your tax bill on the benefit in kind, and the lower the capital allowances that are available for the company.

Capital Allowances

  • For brand new cars with CO2 emissions of 95/km or less =        100% relief
  • If CO2 emissions are between 96g/km and 130g/km =               18% relief.
  • If CO2 emissions are more than 130g/km =                                8% relief.

However fear not, many car manufacturers have cottoned on to the governments tactics and are producing some flash, CO2 friendly cars, for people who can’t quite bring themselves to drive around in a Smart car! Some of the cars available which have 95g/km or less are Lexus CT 200h S, Toyota Yaris Hybrid T3 1.5 WT-I and Volkswagen Polo Bluemotion 1.2 TDI. For more cars in this category please see www.greencarsite.co.uk

Benefit in kind

The car benefit charge for a full year is obtained by multiplying the list price of the car (plus accessories, less capital contributions) by the ‘appropriate percentage’. For example if you buy a Lexus CT 200h which has 87g/km CO2 emissions, the benefit is calculated at a rate of 10% of its list price of £21,995, giving a car benefit of £2,195. This results in a basic rate tax payer paying £439 in tax!

Please contact us if you require any further information.

 

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Would you like the Tax Man to pay the deposit on your New Car!

Many people when choosing their next car don’t know that if you buy a new car before the end of March 2013 then HMRC could pay the deposit.

If your operating a business and are looking at purchasing a vehicle with a CO2 emission below 110g/km then you will be entitled to write off the cost of the vehicle against your profits for that period. Therefore if you are a basic rate tax payer this will reduce your tax charge by the equivalent of 29% of the value of the car, which is more than the deposit. If you were a higher rate tax payer this could reduce your tax liability by up to 42% of the cost of the vehicle.

You probably also didn’t know that there are over 659 cars that have a CO2 emission below 110g/km. It will surprise you what cars have CO2 emissions below this magic figure, here are just a few examples:

Audi               Some of the A1 and A3’s

BMW              Some of the 1 and 3 Series

Citroen           Some of the C1, C3 and C4’s

Fiat                 Panda’s, 500’s and Punto’s

Ford                Ka’s, Fiesta’s and Focus’s

Honda             Jazz, and Civic’s

Hyundai          I10’s, I20’s and I30’s

Kia                  Picanto’s and Rio’s

Lexus              CT200h’s

Mazda            Some of the 2 and 6 series

Mercedes       Some of A and one of the E Class

Mini                 1.6 One’s and Cooper’s

Nissan            Micra and Note’s

Peugeot         107’s, 207’s, 208’s, 308’S and 508’s

Renault           Clio’s and Megane’s

Seat                Ibiza’s and Leon’s

Skoda             Fabia’s and Octavia

Smart              Fortwo’s

Suzuki Alto’s and Swift

Toyota            Aygo’s and Prius

Vauxhall          Corsa’s and Astra’s

Volkswagen   Polo’s, Golf’s, Jetta’s and Passat

Volvo              C30 and V40’s

So if you are looking for a new car remember that the tax man could pay your deposit. You need to act fast because from April 2013 the CO2 criteria will become even more stringent reducing from 110 g/km to 95g/km.

Think Bike!

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Would you consider the use of a motorcycle in your business?

In recent years, the capital allowances available on cars have been increasingly restricted based on the CO2 emissions in order to encourage business owners to consider  more environmentally friendly options when purchasing new vehicles.

Cars purchased as of 6 April 2012 with CO2 emissions between 110g/km and 160g/km would qualify for an 18% annual writing down allowance whilst cars exceeding 160g/km only 8%. (The CO2 emissions of a car can be found on it’s V5 documentation)

At this present time, cars with CO2 emissions below 110g/km are eligible for 100% first year allowances, however there are limited options available with such low CO2 emissions and this generous allowance may not continue into the future.

Prior to April 2009, motorcycles were included under the HMRC definition of a ‘car’ however motorcycles purchased after 6 April 2009 do not fall into this category and therefore offer more scope for capital allowances, with up to 100% of the cost of the motorcycle available for deduction in the financial year it was purchased.

Any allowances available on cars would be subject to a reduction for private use, as would the allowances available on a motorcycle, the main difference being the amount of allowance available to begin with.

For example, for the financial year in which it was purchased, a car costing £10,000 with CO2 emissions of 130g/km would qualify for a writing down allowance of £1,800 (£10,000 @ 18%).

The same scenario where the car has CO2 emissions of 170g/km, the allowance would only be £800 (£10,000 @ 8%).

A motorcycle costing £10,000 however, given that it would not fall under the HMRC definition of a ‘car’, would qualify for a £10,000 writing down allowance in the financial year of purchase under the Annual Investment Allowance Scheme (capped at £25,000 p.a. for the year 6 April 2012 to 5 April 2013).

What about the small print? Obviously you would have to be able to justify that it is reasonable for you to use your motorcycle within the course of your business i.e. it would be highly unlikely that you could class a motorcycle as a suitable method of transport for a plumber who would have to carry tools etc.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Image courtesy of gualberto107 at FreeDigitalPhotos.net