All You Need To Know About Company Car Tax
Company cars can be a costly benefit to offer, but there are steps that staff members can take to reduce the associated expenses with particular focus on the tax liabilities. The question remains: how can employers maintain a low tax amount while still offering this benefit to their employees?
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Opting for low-emission vehicles will help to reduce tax bills, and green cars can also boost the staff member’s interest while reducing tax amounts.
A benefit-in-kind (BIK) tax will be determined according to the vehicle’s list pricing and CO2 emissions.
To keep the cost of the company car usage low, employers need to first complete research regarding the costs associated with running company car schemes. This will mean looking at insurance – cheap car insurance from Money Expert – and also tax.
For the most tax-efficient vehicle, the business needs to consider the CO2 or carbon dioxide emissions of the car and this will determine the tax rates. The government’s continuous efforts to reduce the country’s level of CO2 emissions have resulted in the introduction of low-emission company car tax regulations.
1. Putting A Carbon Emissions Cap Into Place
By capping the carbon dioxide emissions produced by company cars, it is possible to keep car tax low as the BIK tax is calculated by the carbon emissions and car listing price. Making the vehicles available via a salary adjustment can also assist staff and employers save earnings; however, it is crucial that the employers emphasize the significance of these savings to the employees.
According to Terry Harvey at Hitachi Capital Vehicle Solutions, the use of a CO2 capping strategy is growing in frequency; thereby ensuring that only cars below specific emission levels will be chosen for use. Restrictions are often linked to government policy with caps of 130kg/km being the most common limitation. This limitation ensures that a driver’s BIK tax is not above 25% Employers also benefit as they maintain a low national insurance contribution, which are linked to the vehicle’s pricing.
Harvey stated that cars with under 50g/km of carbon emissions will not attract more than 9% BIK tax in the following three tax years, with the cost increasing to 13% from 2018 to 2019. Drivers will often focus on the car model in this tax band to maintain or keep their BIK tax cost controlled.
Iain Carmichael, the chief commercial officer at Tusker – a car salary sacrifice provider – promotes the use of CO2 emission capping agreeing that the sensible gap of 120g to 130g of carbon emissions is what employers need to start offering as a benefit to their staff members.
2. Implementation Of Green Cars
The introduction of green cars in company car schemes can potentially prompt a take-up among staff members and address the issue of carbon emissions output. Plug-in hybrid electric cars and complete electric cars will offer the most significant savings because of their low or zero-level CO2 emissions. Carmichael purports that company cars which are green cars will be directly linked to fuel efficiency and miles-per-gallon capacities; thereby, saving the company a large amount of money.
The tax principal at accountancy firm BDO International, Shawn Healy, stated that environmental factors are slowly becoming a part of the choices being made by staff regarding cars. Healy reported that government policies are being pushed by manufacturers to sell corporations more green cars.
According to Carmichael, there is now a greater range of low-emission vehicles available on the market with green cars being far less restrictive in choice than previous years. Considering the broader range of green car options, employees are now provided with more control over the vehicles being purchased.
David Brennan, the chief executive at Nexus Vehicle Management, stated that more electric cars are being purchased by corporations making the driving price drop and increasing charging points. Moreover, electric cars should not be taxed as a type of extra incentive – or so says Brennan.
3. Following The Manufacturers’ Lead
Even the vehicles will the lowest level of CO2 emissions will be subject to car tax rises over the following five years; however, as manufacturers strive to reduce the level of emissions, the company car drivers and employers will be able to maintain tax rates that are similar to the current rates.