As part of our series of articles on small business tax advice, Steven Glicher accountants hope you find this article about the advantages and consequences of company car benefits useful.
Hopefully the information contained in this summary will help directors make more-informed tax-efficient decisions about their next company car.
Company Cars and how they affect your tax position.
Employees pay tax on company benefits like cars, accommodation and loans. The amount of tax due depends on the value of the benefits that they get. Employees will always pay tax on benefits from their employer if they are a company director or earn £8,500 a year or more (including the value of the benefits).
A company car benefit arises if a car is made available to an employee (or their family/ household) for private use. If fuel is provided for the company car, a company car fuel benefit is also incurred. The employee is then taxed on the benefits calculated and the employer pays National Insurance on them.
How are Company Car Benefits calculated?
A company car benefit is based on a car’s list price for tax purposes (generally list price plus accessories, less capital contribution) and its official CO2 emission figure. Using a table provided by HM Revenue & Customs (HMRC), the official CO2 figure for the car is converted into an appropriate percentage and applied to the list price for tax purposes to determine the company car taxable benefit charge for the year.
Private fuel benefit is calculated in a similar way to the company car benefit. A car fuel benefit charge multiplier (set by the Government) is multiplied by the same percentage used to calculate the company car taxable benefit.
The amount of personal tax due on the benefits depends on the income tax bracket the employee/ director falls into.
Company car benefits in 2013/14.
These are the current rates applicable to company cars during the 2013/14 tax year:
- The lowest appropriate percentages are 0% and 5%. However, the 10% rate now applies to cars with CO2 emissions of 76g/km to 94g/km. (previously in 2012/13, this band extended to 95g/km).
- Thereafter, the appropriate percentages will increase by 1 percent in 5g/km increments for all cars with CO2 emissions between 95g/km to 215g/km, up to the normal maximum of 35g/km.
- The car fuel benefit charge multiplier increases from £20,200 to £21,100.
How can Steven Glicher accountants help?
Our accountants can talk you through the various tax implications of your next vehicle purchase: that includes all aspects of income tax, capital allowances and VAT, to help ensure that you make an informed decision. We can also look at the implications of you making personal contributions towards the provision of your company car, the vehicle’s availability and the possibility of ‘sharing’ the vehicle with colleagues or your family members. We can also discuss tax planning opportunities in relation to how your motor running expenditure is structured and paid for.
For further information about company car benefits or any other small business tax advice, please contact Steven Glicher Accountants on 0161 485 8007.