How To Make The Most Of Your Tax Allowances and Still Drive Away A Great Deal
Company car tax is confusing. You know that, and we know that, and anyone who doesn’t know that has never had to worry about it – you might say they are the lucky ones but, don’t forget, they don’t have a nice looking, smart, probably incredibly economical and hopefully environmentally friendly (this is important for more than just green reasons) company car. A company car is what is known as a benefit in kind (BIK), and, just like all the other BIKs you may receive during your working life (loans, living expenses, medical insurance and so on), you will need to pay a certain amount of tax on it. Or, if the car is for an employee, they will need to pay the tax.
There are, of course, pros and cons to having a company car, just like with any benefit in kind (something you get from your work that is in addition to your annual salary), and one of the ‘cons’ of the company car is the tax. The tax itself is worked out on a percentage of the total value of your car, and the value of the car is worked out on the list price, plus the VAT, plus the delivery, plus the extra options you or your employer went for (assuming they cost more than £100). It is also based on the car’s CO2 emissions (hence mentioning the green credentials above), which can offset some of the other charges, lowering the amount of tax you end up paying. In the past, diesel engines have always been a favourite with employers because they offered more miles per gallon and had lower CO2 emissions. Now, of course, there are other options open (such as hybrid and electric cars) when it comes to getting the best – and most environmentally friendly – vehicle.
Like we said, it’s complicated. You need to know the exact value of the vehicle, then you need to multiply that value by the correct tax rate (taking into account the CO2 emissions for that particular car). Then you need to times all of that by your own personal tax rate (dependent on your salary), and ta-da! There you have it! Unless, of course, you only use the car for part of the time, the emissions are super low (or non-existent), or you put something towards the cost of the car yourself. Then it’s back to the drawing board (or calculator in this case) and you need to do the sums all over again.
Or you could ask your accountant to deal with it all.
We at Yorkshire Accountancy are happy to discuss the implications of car tax with you, and we’ll help you complete the P11D that you need to send off to get your accounts in order and ensure you are paying the right amount of tax. That’s just one of the many things we do when it comes to taxation and making sure our clients don’t fall foul of the rules.
But what we can’t do for you is decide which vehicles are the best for your business, and your employees. It takes research, a will of iron (you don’t want to go for your gut instinct on this one, no matter how good the car looks or what colour it comes in), and some savvy tax knowledge that will give you an insight into making the right choice. You don’t want the car you are giving your top sales person to end up being a burden on them. Equally, you don’t want to choose something that’s not quite what you wanted because you assumed the tax was going to be high on the one you really wanted. It pays to do your research when it comes to the tax implications as well as the miles per gallon and extra features you can get on the car itself.
Enjoy the search. It’s not every day you get to browse some pretty top of the range cars, and maybe even take them out for a test drive. Just remember that although the car may be a stunner, the tax can all too easily be pretty stunning too (in a bad way)![/vc_column_text][/vc_column][/vc_row]
I Need A Company Car… But I Don’t Need A Tax Headache!
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