By Ellen Curnow, Accountant at Hive Business
Last year, we wrote about the benefits of choosing a green company car. Since then, there have been some changes in tax rates and rules which mean the comparison between a petrol/diesel and electric car have changed.
For those that don’t know; if your company buys a car for you to drive and you’re able to use that vehicle for personal transport outside of work, then it’s considered a company car but there is a monetary value for using it privately. Because of this monetary value, having a company car results in a Benefit In Kind (BIK) and this is treated as additional income; the amount is calculated using a percentage of the list price of the car.
HMRC determines the percentage amount on that list price, broadly based on the amount of CO2 emissions a car emits. The cleaner your car is (i.e. the lower your CO2 emissions are), the lower the percentage charged.
It is also worth noting that diesel vehicles carry a 4% surcharge over petrol models with similar CO2 emissions, because they emit greater amounts of other harmful pollution; be sure to check this if you’re buying a diesel company car.
An alternative is to buy your car privately and claim for business mileage. Because of the increase in the BIK percentages, you will find that you need to consider how much the car is costing you (and saving you) and how much the BIK will be for that car.
The best advice is if you do buy a company car, go green and be rewarded with a lower tax bill. Or, if you want a petrol one – buy it privately.
As a basic comparative, if you were a higher rate tax payer and bought an electric car for £65k, between the Company and yourself, you would pay around £1.5k in tax over the course of three years. Now, if we use the same example, but with a petrol car, between the Company and yourself, you would pay around £44k in tax over the course of three years.
Get in touch to discover the most tax efficient way of spending your money and buying the things you need for your business.