Company car tax was reformed in April 2002 to an emissions-based system. This was to encourage businesses to choose more fuel-efficient cars in return for greater tax relief.<\/p>\n\n\n\n
As a general rule, the greater the vehicle\u2019s CO2 emissions, the greater the taxation. This means that electric vehicles and hybrid cars will attract less tax than petrol or diesel cars.<\/p>\n\n\n\n
The New Rates<\/u><\/em><\/strong><\/p>\n\n\n\n For the current financial year 2019-2020, the BiK rate for zero-emission vehicles is 16%.<\/p>\n\n\n\n However, the government has announced that it will cut BiK rates for zero-emissions vehicles down to 2%.<\/p>\n\n\n\n This could save employees and business owners thousands of pounds in tax each year; making environmentally-friendly cars an appealing option.<\/p>\n\n\n\n The table below shows the new Benefit in Kind bands and rates for tax year 2020 to 2021. <\/p>\n\n\n\n So how exactly does company car tax work?<\/u><\/em><\/strong><\/p>\n\n\n\n Company car tax applies to cars bought by employers for their employees\u2019 private use. The tax does not apply to a vehicle owned by a company that is used solely for business use.<\/p>\n\n\n\n Company car tax is different and more complicated than Vehicle Excise Duty (Vehicle Tax).<\/p>\n\n\n\n Essentially, company car tax is made up of two parts:<\/p>\n\n\n\n How much the company pays is determined by the car\u2019s P11D value and its CO2 emissions.<\/p>\n\n\n\n The P11D value is the value of the car including VAT, accessories\/add-ons and the delivery fee. The company must fill out a P11D form each year and pay a certain fee to the Treasury in National Insurance Contributions.<\/p>\n\n\n\n The employee<\/strong> on the other hand, will pay BiK (Benefit in Kind) tax on the car. The BiK tax rate is determined by three factors:<\/p>\n\n\n\n Example:<\/u><\/em><\/strong><\/p>\n\n\n\n Let\u2019s say that you buy a car that has a P11D value of 30,000 and the BiK band has been set at 16%.<\/p>\n\n\n\n This means the BiK value is 30,000 x 0.16 = \u00a34,800.<\/p>\n\n\n\n The next step is to work out how much tax you will pay on the BiK value by multiplying it by your income-tax bracket.<\/p>\n\n\n\n If you are a 20% taxpayer, you\u2019ll pay 20% of the BiK value \u2013 which equates to \u00a3960 a year.<\/p>\n\n\n\n If you are a 40% taxpayer, it will cost you \u00a31,920.<\/p>\n\n\n\n 2020-2021 Electric Car Example:<\/strong><\/em><\/p>\n\n\n\n If your electric vehicle fell into the 2% BiK band rate during the tax year 2020-2021, you would theoretically pay \u00a3120 a year in BiK for the same car used the in the above example. <\/p>\n\n\n\n BiK Value: 30,000 x 0.02 (2%) = \u00a3600<\/p>\n\n\n\n How much you pay: 600 X 0.2 (20% tax payer bracket) = \u00a3120 a year.<\/p>\n\n\n\n OR: 600 x 0.4 (40% tax payer bracket) = \u00a3240 a year.<\/p>\n\n\n\n Final Note<\/u><\/em><\/strong><\/p>\n\n\n\n Please note that this is not an exhaustive explanation of company car tax, but a general overview. Please also be aware that government policy regarding electric company cars beyond 2021 remains uncertain.<\/p>\n","protected":false},"excerpt":{"rendered":" For the tax year 2020-2021, the government plan to cut BIK (Benefit In Kind) tax rates for zero-emissions company cars down from 16% to 2%. As a result, electric vehicles may be a cheaper option for directors and employees. Overview Company car tax was reformed in April 2002 to an emissions-based system. This was to encourage businesses […]<\/p>\n","protected":false},"author":1,"featured_media":437,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"content-type":"","jnews-multi-image_gallery":[],"jnews_single_post":{"subtitle":"","format":"standard","video":"","gallery":"","source_name":"","source_url":"","via_name":"","via_url":"","override":[{"template":"1","single_blog_custom":"","parallax":"1","fullscreen":"1","layout":"right-sidebar","sidebar":"default-sidebar","second_sidebar":"default-sidebar","sticky_sidebar":"1","share_position":"top","share_float_style":"share-monocrhome","show_share_counter":"1","show_view_counter":"1","show_featured":"1","show_post_meta":"1","show_post_author":"1","show_post_author_image":"1","show_post_date":"1","post_date_format":"default","post_date_format_custom":"Y\/m\/d","show_post_category":"1","post_reading_time_wpm":"300","zoom_button_out_step":"2","zoom_button_in_step":"3","show_post_tag":"1","show_prev_next_post":"1","show_popup_post":"1","number_popup_post":"1"}],"image_override":[{"single_post_thumbnail_size":"crop-500","single_post_gallery_size":"crop-500"}],"trending_post_position":"meta","trending_post_label":"Trending","sponsored_post_label":"Sponsored by","sponsored_post_name":"","sponsored_post_url":"","sponsored_post_logo":"","sponsored_post_desc":""},"jnews_primary_category":{"id":"50"},"footnotes":""},"categories":[50],"tags":[],"class_list":["post-570","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-tax"],"yoast_head":"\n![\"This](\"https:\/\/accountants247glasgowsouth.co.uk\/wp-content\/uploads\/2021\/06\/image.png\")
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