Company cars – are they worth having?

 

Government tax policy on company cars is new heavily focused on steering people towards choosing an efficient or ‘green’ car. This doesn’t have to mean driving a Smart car! There are for instance Audi A3, BMW320d and Honda Civic models which fall into the green (sub 111 g/km) bracket.

For further details, look at :

greencarsite

vca car fuel data

What Green Car

The company claims capital allowances on the cost of the car, and the claim is now related to CO2 emission.

Above 160g/km 8% per annum (prior to April 2012 10%)

Between 111 g/km and 160 g/km 18% per annum (prior to April 20%)

Below 111 g/km 100% in year 1

The ‘benefit in kind’ personal tax paid by the employee is also varied according to the CO2 emission. Also low emission cars are liable to lower road tax.

Example

The following example compares the tax treatment of two cars purchased in April 2012. One is a diesel car (car D) with CO2 emissions of 109 g/km costing £27,500, with a petrol car (car P) costing the same amount but with CO2 emissions of 165 g/km.

 

Year ended March 31 2013

 

Company’s tax position:

 

Car D         Car P

 

Capital allowances claimable 2012/13                                     £27,500   £2,750

 

Corporation Tax relief

at small companies rate – 20%                                                               £5,500          £550

 

National Insurance at

13.8% payable on benefit-in-kind (see below)                                           £569      £911

(there is Corporation Tax relief on this)

 

 

Director’s/employee’s tax position:

Taxable benefit-in-kind

15% of cost car D and 24% for car P                                                      £4,125      £6,600

 

Tax payable assuming

40% rate applies                                                                                           £1,650      £2,640

 

 

Summary

 

The low emission diesel car saves corporation tax of £4,950 above the petrol car– this difference will even out eventually but it will take several years.

 

Employers’ National Insurance: Buying car D will save £342 each year.

 

Director/employee tax: Choosing car D will save the employee £990 each year.

 

 

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