Company Cars: Everything You Need to Know

Company Car

What is the definition of a business car?

A company automobile is a vehicle provided by a corporation or organization to an employee for personal usage as well as work purposes.

Traditionally, business automobiles were purchased in bulk and the keys were simply given over to an employee, but nowadays, many employees are referred to as ‘user-choosers.’ The user can select from a list of options that is limited by their company.

If you are still looking for used cars for sale, the other form of business automobile is the ‘work-need’ vehicle, which is still purchased in bulk and is an important element of the employee’s employment. These automobiles are more utilitarian, such as medium-sized estates, and while the worker will still be taxed the same manner, depending on the car’s CO2 emissions and price, they will have less freedom in terms of what they drive because the company often buys a large number of the same vehicle.

 

What is the procedure for calculating the corporate automobile tax?

The benefit-in-kind (BIK) tax scheme provides the government with a sizable monthly revenue from business car drivers, based on a computation based on two factors: the car’s P11D price and its CO2 emissions figure. The official emissions statistic assigns an automobile to one of many bands, ranging from 13% to 37% for the 2018/19 tax year, and that percentage is the taxable benefit of the vehicle. A Ford Focus 1.0-litre petrol with 125 horsepower, for example, emits 108g/km, putting it in the 22 percent BIK tax band: 22 percent of the car’s cost. Depending on the driver’s individual income tax bracket, you’ll be charged 20% or 40% of that amount.

 

How can I calculate the P11D value of my car?

The tax office uses the automobile’s P11D value to determine how much a corporate car driver must pay. It’s extremely similar to a car’s list price, including VAT and any manufacturer-specified delivery charges, which vary by brand, but not its initial registration cost or Vehicle Excise Duty.

One thing to keep in mind when looking at the P11D value of a car is that it includes any optional accessories. If the driver opts for larger alloy wheels, for example, there’s a good probability that the CO2 emissions would rise as well, potentially resulting in a double-whammy of costs if the car is placed in a higher BIK band.

The government’s Ultra Low Emission Vehicle grant, which reduces the cost of buying an electric car but has recently been severely curtailed, is not taken into account in the P11D cost, therefore drivers are taxed on the pre-grant price.

 

How can I keep my corporate car tax cost to a minimum?

There is one option for a corporate vehicle driver to lower the amount of money he or she pays to the government. HM Revenue and Customs has been exceptionally liberal with electric and plug-in hybrid automobiles in an effort to encourage drivers to switch to plug-in vehicles in order to reduce vehicle emissions and enhance air quality. That will be even more so starting in April 2020, when the tax on fully electric vehicles will be reduced.

However, even before that, automobiles producing 50 grams per kilometer or fewer – which only includes plug-in hybrid and full electric vehicles – pay substantially less tax than even the most efficient diesel counterpart.

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