Is a company car worth it? Tax facts

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Learn more about company car tax

  • What is company car tax? – click here
  • Learn about company car tax on pick ups – click here
  • Find out about tax on company vans – click here
  • Check out our company car tax tables
  • Find out how to calculate company car tax
  • What’s meant by the P11D of a company car? Click here

HAVE you been offered a company car from your employer? Wondering ‘Is a company car worth it?’

Well, you’re not alone and despite the same worries for other workers, recent figures released by HM Customs and Revenue (HMRC) have shown an increase in the number of company cars for the first time in 10 years.

This data shows that 950,000 employees paid benefit-in-kind (BIK) tax on a company car in 2014/15 – a 1% rise on the 940,000 from the previous financial year. In fact, it’s the first time company car BIK has increased since 2006/7, when the number totalled 1.16 million!

So, you’ve been lucky enough to be offered a company car (usually a lease car), which has been supplied as part of your job and you’re still able to use it for personal transport outside of work?

Well, then it becomes a taxable perk – or in official terminology a ‘Benefit In Kind’ (BIK). This is because your private use of the car has monetary value and as such, HM Customs and Revenue see this as additional income. Why not try our Company Car tax Calculator to see what you might pay?

Confused about the company car tax system and how it’s calculated? No problem, it is confusing as the amount you’ll have to pay on a monthly or weekly basis will not just be calculated on your car’s emissions like road tax.

Although your company car’s CO2 emissions will be a key part of the company car tax calculation, other factors will be the car’s official list price, the value of the optional extras, what type of fuel it uses, plus even how and when the car is paid for and used!

On top of this, the amount of car tax you’ll pay also varies according to how much you’re paid. So if you’re a 20% tax payer, you’ll pay 20% of the taxable portion of the car’s P11D value. However, if you’re a 40% tax payer, you’ll pay 40% on the taxable portion of the P11D value – which is usually deducted from your monthly pay.

To see whether a company car is for you, you first need to work out the tax rate for the car you want using company car tax rules. Firstly look at the cars’ carbon dioxide (CO2) emissions, note that all the emission bands have different taxation percentages of a car’s final P11D value.

What’s a P11D value I hear you ask? Well, it’s essentially the car’s recognised list price including options added to the car, but without non-taxable items such as road tax and first registration fee.

So what happens if the car you’re after costs less to buy than its official P11D value? Well, it won’t mean you pay less tax, as the BIK value is the same. To reduce the BIK value you’ll have to be either working part time, or paying something towards its cost – then you should also see a reduction in company car tax if this is the case.

Lowest polluting company cars are the best option for the most affordable company car tax, as they are eligible for a five per cent rate, but on the flip side, the worst polluters will attract a 35% tax rate.

Finally, be aware that electric and ultra-low emission vehicles that were once exempt from company car tax are now included and can face a rate up to 10%.

You are viewing this post: Is a company car worth it? Tax facts. Information curated and compiled by Kayaknv.com along with other related topics.

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