Company car versus cash? That’s the question. What’s the answer?
Tax rules applying to company car changed and are increasingly more complex. Since April 2017, employees can choose between company cars or cash allowance. Making it more difficult to decide between driving a new car out of the showroom or taking home a cash allowance.
Did you know that employees will be taxed on the option which is of a greater value – not on the actual option you select?
Whatsmore, the amount of tax paid is further impacted by your own tax band rate.
Car companies and lease companies are feeling threatened by the changes. Companies such as Audi, Toyota and Vauxhall are posting videos on YouTube. Each explaining to potential buyers how to calculate the P11D value of specific company cars across their ranges.
The number of videos and the diverse range of vehicles mentioned indicates how complex company car tax has become and that car companies are concerned about drop in lucrative company car sales. Stay with me.
Today I’ll provide you with clarity and help you to decide whether taking a company car or a cash allowance you’ve been offered is right for you.
How do I work out my company car tax?
Put everything in order and have the following information in front of you:
- C02 emissions for chosen company car
- P11D value (list price of car + any added options & accessories (over £100) – first registration fee & vehicle excise duty)
- Type of fuel (diesel now has 3% surcharge – excludes diesel hybrids)
Now to calculate company car tax and benefit in kind you need to:
- Company car tax band multiplied by P11D Value = Benefit in Kind value
- Benefit in Kind Value multiplied by marginal rate of tax (20% or 40%)
If C02 emissions, for the car you’ve selected, are in-between the C02 bandings then round the number down to the lower band rate.
Start now. Make sure you are collecting all the right information for this financial tax year. It will ease your P11D submission for July 2018.
I’d like to take this opportunity to make you aware of 3 further changes in company car tax rules applied from 6 of April 2017:
- Zero Emission cars are now subject to 7% benefit in kind tax (5% from April 2015). From 6 of April 2019 this will rise again to 16% benefit in kind value.
- Since 6 of April 2017 a 4 percentage point differential separates the 0-50g/km and 51-75g/km CO2 bands. From 6 April 2018 the range 51-75g/km and 76-94g/km CO2 bands will reduce again by 3 percentage points differential. Same from 6 of April 2019
- Ultra-low emission cars have 2 bands:
- 0-50g/km (9%, diesels 12%) From 6 April 2019 rising to 16%
- 51-75g/km (13%, diesels 16%). From 6 April 2019 rising 19%.
Before making your decision between company cars or cash allowance here’s 2 useful links to help you with company car tax calculations:
1 Car tax tables based on C02 emissions
For cars registered for the first time since 6 April 2017 here’s the table for C02 emissions which helps you work out your first payments and second annual payment that applies for the time you own the car.
HMRC has provided a table detailing vehicle tax rates.
2 Company Car and Car Fuel Benefit Calculator
Finally, the next P11D submission deadline is 6 of July 2017 for tax year 2016/2017. Please get in touch now if you need any advice on Company Car tax or any other Benefits in Kind and expenses.
If you require more information on Benefits in Kind and P11D form submissions read my last blog: a simple guide to P11D and benefits in kind
Call 0141 290 0262 or email and head up your enquiry with ‘P11D submission’.
Bruce Wilson, Director Murrison & Wilson