Background Information
In the UK, company cars are a popular way of driving and owning a car. A company car can provide a tax advantage and a cost advantage to its owner, depending on how much they use it. However, if you want to take advantage of these benefits, you need to know how much the car will cost you in tax. This article will provide an overview of the main taxes associated with company car ownership in the UK, and advice on how to minimise your company car tax bill.
What Taxes Do You Have To Pay On A Company Car?
The main taxes that you will have to pay when driving a company car are:
1) Benefit-in-Kind (BIK) tax
2) Vehicle excise duty (VED)
3) Fuel benefit charge (FBC)
Benefit-In-Kind (BIK) tax is applicable to company cars and covers the value of the vehicle, including non-monetary benefits such as free fuel, free servicing or free insurance. The amount of tax you will be charged will depend on the value of the car and your personal tax rate.
Vehicle excise duty (VED) is the tax charged on all cars that are registered in the UK. The amount of tax you will be charged will depend on the type of car, the date it was registered and the emissions rating of the car.
The fuel benefit charge (FBC) is a special tax which is applied to company cars that receive free fuel. The amount of tax you will be charged will depend on the value of the fuel.
How Much Will My Company Car Actually Cost Me In Tax?
The amount of tax you will be charged for your company car will depend on a number of factors, including the value of the car, your personal tax rate and the level of free fuel benefits you receive. However, by making use of available tax reliefs and exemptions, you can minimise the amount of tax you have to pay on your company car.
For example, if you are a ‘low mileage’ user (i.e. you drive less than 7,500 miles per year), you can claim a tax advantage of up to 85%. Alternatively, if you lease your company car, you will only be charged tax on the value of the ‘rental’ payments you make, rather than the full value of the car.
What Else Do I Need To Consider?
When considering the cost of a company car in tax, there are a number of other factors you should take into account. For example, if your company car is more than three years old, you may be eligible for reduced vehicle excise duty (VED).
You should also consider your personal tax situation carefully, as some of the tax reliefs available for company car users may not be available to you. For example, if you are a higher rate taxpayer it is unlikely that you will be able to receive any tax relief at all.
What Are The Alternatives?
If you are not willing or able to pay the tax associated with your company car, there are alternatives available. For example, you may be able to switch to a cash allowance, or a car allowance, which can be paid tax-free, or you could lease a car privately, which will not affect your tax bill.
What Advice Should I Follow?
If you are thinking of taking out a company car, it is important to consider the associated tax implications carefully and take steps to minimise your tax bill.
You should also seek advice from a financial advisor before making any decisions about your company car, to ensure that you are making the most tax-efficient choice.
Tips To Minimise Your Company Car Tax Bill
There are a number of steps you can take to minimise your company car tax bill. These include:
1) Taking advantage of tax reliefs and exemptions
2) Ensuring you are claiming all the allowances you are entitled to
3) Shopping around for the best deal
4) Leasing a car privately
How To Calculate Your Company Car Tax Bill
When calculating your company car tax bill, you need to consider:
1) The value of the car
2) Your personal tax rate
3) The level of free fuel benefits you receive
4) Any applicable tax reliefs or exemptions
These factors will all determine the amount of tax you need to pay on your company car.
What Are The Advantages Of Having A Company Car?
Although company car ownership can be expensive, it can provide a range of benefits, such as fuel savings and cost savings.
By being a low-mileage user (under 7,500 miles per year) you can take advantage of up to 85% in tax relief. You can also benefit from reduced running costs, free servicing, free insurance, free fuel and free road tax.
By taking advantage of these benefits, you can save money on running and maintenance costs, as well as reduce your company car tax bill.
How Do I Choose The Right Company Car?
When choosing the right company car, you need to consider a number of factors, such as:
1) Your budget
2) Your personal tax rate
3) The cost of the car
4) The running costs
5) The emissions rating
By taking all these factors into account, you can determine the most tax-efficient option for your circumstances.
How Can I Get Expert Advice On Company Cars?
If you are thinking of taking out a company car, it is important to seek advice from a financial advisor. They will be able to give you specialist advice on how to choose the right car and make the most tax-efficient choice.
