Jack Fowler FCCA explains and compares company car tax rates between electric, hybrid, and petrol vehicles. <\/h2>\n
How beneficial are electric vehicles and vans for your business, from a tax perspective?<\/p>\n
By comparison, how punitive is it to now own and operate combustion engine cars through your business?\u00a0<\/p>\n
Whether you’re an owner-manager pondering the most tax-efficient way to reward your staff, or even an employee weighing up the pros and cons of your compensation package, it’s crucial to understand the nuances of company car tax<\/span><\/a><\/span>, in particular benefit-in-kind and how the capital allowances scheme is applied to these assets.\u00a0<\/p>\n In this blog post we’ll demystify these regulations and concepts to explain how company cars are taxed<\/span>, and the implications of owning various different types of vehicles and vans from a tax perspective. Needless to say zero carbon dioxide emission vehicles tend to be the most tax advantageous but there are a multitude of subtle considerations that need to be considered carefully regarding other cars.\u00a0<\/p>\n If you need your employees to travel as part of their work, you’ll likely want to reward them well for what they do, but at the same time try to achieve this by investing in your business in a financially efficient manner. Be sure then to read on, for this post can provide you with the essentials as to company car benefits to help steer you in the right direction.\u00a0<\/p>\n <\/p>\n HM Revenue & Customs applies benefit-in-kind tax<\/a><\/span>, also known as company car tax, where a vehicle is made available for private use by an employee. Benefit-in-kind (BIK) is also referred to as a non-monetary benefit, or perk on top of their salary, resulting in the tax being applied to the benefit your employee receives from this.\u00a0<\/p>\n<\/div>\n The exact benefit they receive is calculated as a percentage (or rate) of the car’s P11D value, in comparison to if they simply received an equivalent amount in pay before income tax.\u00a0<\/p>\n BIK rates have been adjusted recently with the aim of encouraging employers, and the drivers of company cars, to shift away from petrol and diesel vehicles to fully electric cars and\/or plug-in hybrids.\u00a0<\/p>\n <\/p>\n Capital allowances<\/a><\/span> are a tax mechanism whereby you can obtain relief against the capital expenditure, say of purchasing a company car, by deducting it from your annual taxable income.\u00a0<\/p>\n<\/div>\n If you purchase a new company car, it’s likely you won’t be able to deduct the total sum of the car from your profits in the tax year in which you purchased it. Instead the tax deduction is spread across the timeframe of your ownership. This means every tax year you obtain a proportion of the cost of your company car as a deduction against your profits.\u00a0<\/p>\n The amount of the deduction reduces with each passing tax year. Therefore it can take many years (even beyond your ownership of the car in question) to write off the vehicle in full against your profits. Click here<\/a><\/span> for more details on the capital allowance rates.\u00a0<\/p>\n![\"Get](\"https:\/\/no-cache.hubspot.com\/cta\/default\/2284600\/cfef86be-73e5-48b9-bb66-f8f29dd35800.png\")
<\/a><\/span><\/span><\/p>\nWhat is benefit-in-kind car tax?<\/h2>\n
What are capital allowances for business vehicles?\u00a0<\/h2>\n