As we are coming to the beginning of a new tax year, there are a number of changes which make this a good time for you to consider whether you should have a company car.
Car benefit percentage increases
Firstly, the company car tax benefit percentages are again increasing by 2% (and are tabled to increase by a further 2% per annum for the next few tax years).
Car benefits are calculated using two factors. The list price multiplied by a percentage applicable to the cars Co2 omission.
The list value is the book cost as when the car was first registered. As a vehicle increases in age and therefore decreases in real world value, this combined with the percentage increasing annually, could mean the tax you are paying on a benefit could actually be more than the cost of providing the vehicle personally.
Vehicle Exise Duty Rules
There are also new vehicle excise duty rules coming in on 01/04/2017. Higher value low emission cars will be paying substantially more car tax than they do currently. Therefore if you are planning on changing, now may be the time that you consider to do this as the old rules will apply to cars purchased by 31/03/2017.
Salary Sacrifice Rules regarding car schemes
The government are also bringing in new guidance with regards to salary sacrifice car schemes from the 01/04/2017. Any orders placed before the end of March will save Tax and NI until 2021. For orders starting after April 2017 the current Tax and NI savings will continue but only for cars which emit less than 75 Co2g/Km, that’s all your plug-in hybrids and pure electric vehicles.
Another point to note is that HMRC have also tightened their guidance on the rules with regards to car benefits. It is important if a car is not being a company car that all the paperwork and insurances etc are in the persons own name. If the car is leased by the company and a driver re-inburses the 100% of the monthly cost to the employer for that lease, HMRC still deem that this is a company car for tax purposes and the benefit should be calculated using the formula. The reimbursed amount would be deducted off the benefit but the benefit could be substantially more than the cost to the employer.
The cost of a car in terms of upkeep is a highly personal calculation so it is not something that we can advise on without having full details and completing some work, but if you would like to discuss this with us please fell free to contact us on 0161 723 3211.