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An important part of choosing the company car that's right for you is knowing how much it will cost you in Benefit in Kind tax.
Whilst being provided with a company car is always going to be the cheapest way for you to drive a modern, well maintained vehicle, it makes good sense to select a car that fulfils your needs, yet keeps the amount you pay in tax, as low as possible.
The company car tax system and the amount you pay is based upon the retail price of the car (plus any extras) and the C02 emissions the car produces. Ideally, to save money, you need a car with the lowest C02 emissions and the lowest retail price.
There is a sliding scale based upon the C02 emissions on the Vehicle Certification Agency website which will help you find out what emissions your current car produces and what the car you are considering produces.
Once you know the C02 rating, you can then go to the Company Car and Car Fuel Benefit Calculator and you can easily calculate the amount your new car will cost you.
If you need any information or help in doing that, please do not hesitate to contact us and tell us the car in which you are interested and we will get straight back to you with all the information, including how much tax you will have to pay.
Benefit in Kind Tax – Vans
Want your drivers to pay more income tax? No? Then don’t get caught by the new rules on private van use.
There are major changes to the van tax payable by company van drivers. From April 2007, the tax liability rises by 600%: from £500 to £3000.
Your company drivers will not thank you when they suddenly have to pay more tax from April’s wage run. If you haven’t prepared your business for the changes, there is the possibility of a real HR problem.
So what is changing? If your driver uses their van for private mileage, they must pay company van tax. During the current 2006/07 tax year that liability is set at £500.
That means a driver paying income tax at the 22% rate will have an annual charge of £110 (22% of £500). From April that same driver will pay £660 in tax (22% of the new £3000 liability), whilst a 40% taxpayer will pay £1200 in tax (40% of the £3000 liability).
But the tax payable doesn’t stop there. If your company also pays for the driver’s private mileage, they will be charged the annual tax liability for ‘free’ fuel of £500. For a 22% taxpayer that means an additional £110 per year (22% of £500) or for a 40% taxpayer its £200 per year (40% of the £500).
Effectively, a 22% taxpayer previously paying just £110 a year for vehicle and fuel will now be looking at £770 a year, whilst the 40% taxpayer, previously paying just £200 a year will be paying £1400 a year.
However, it’s not all bad news. Drivers can pay no tax whatsoever if there is no private mileage. And that includes driving the van between home and work.
To make sure your employees don’t incur unwanted tax bills, HM Revenue & Customs (HMRC) suggests employers keep a record to show there has been no private use. You can find additional HMRC guidance by visiting http://www.hmrc.gov.uk/vans/index.htm. |
Local Service
National Support
Tel. 01603 909 968
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