Company car tax rises take effect

Company car tax rises take effect

The company car has continued to be an important benefit for many employees, despite increases in the taxable benefit rates in recent years.

However, April 2018 saw the introduction of further changes affecting employer-provided cars, which could have a significant impact on your business motoring costs.

Benefit-in-kind rates

Company cars are essentially taxed as a benefit-in-kind (BiK) by multiplying the list price of the car (including most accessories) by the ‘appropriate percentage’. This is set by reference to the car’s fuel type and level of CO2 emissions.

In 2017/18, a reduced BiK rate of 9% applied for vehicles emitting no more than 50 g/km of CO2, but from April 2018 these rates have started to increase significantly.

Cars with CO2 emissions of 0-50 g/km are now liable to a rate of 13%, with similar rises applying to cars with higher levels of emissions.

Diesel cars

April 2018 also saw an increase in the additional diesel car supplement, which has risen from 3% to 4%. The maximum cap of 37% still applies (unless the car is registered on or after 1 September 2017 and meets the Euro 6d emissions standard).

Capital allowances

Changes have also been made to the tax relief for business expenditure incurred on or after 1 April 2018. The 100% first year allowance for expenditure on cars now applies where emissions are less than 50 g/km, reduced from the previous level of 75 g/km. In addition, the limit for attracting an 18% writing down allowance has fallen from 130 g/km to 110 g/km.

Electric charging points

There is perhaps more welcome news for those employers providing charging points for electric or hybrid cars, as HMRC intends to exempt employer-provided electricity from being taxed as a BiK, to apply retrospectively from 6 April 2018.

Further changes to company cars are due to take effect in 2019 and beyond, including additional increases in the BiK rates and the introduction of a new range of bands for ultra-low emission vehicles (ULEVs).

We can help you to plan ahead and decide on the most tax-efficient option for your business motoring needs.

For more information, including the latest tax rates, visit the Tax Strategies area of our website.

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