Company Car Tax Set to Rise

If you drive a company car (or indeed own a fleet of them), you’ll have a vested interested in the new company car tax rules kicking in next month.

The new regulations, in force from the beginning of April, will affect both businesses and drivers, and threaten to overhaul the whole company car culture.

For drivers, it’s likely to mean less vehicle choice and more tax.

Here’s how it works currently. For each vehicle a company buys, the firm can claim a ‘capital allowance’ – effectively a percentage of the car’s price that they can write off against taxed profits.

These capital allowances are most generous on cars that produce carbon emissions lower than 160g/km – but in a matter of weeks, that limit drops considerably to 130g/km. In order to still get the most benefit from the tax break then, firms will have to change the kind of cars on offer to employees.

Out may well go staples of the company car world like the BMW 1 series, in will come more modest, greener models.

Cars with lower emissions still (anything below 110g/km) currently afford businesses a 100% capital allowance in the first year. This threshold too, however, is changing. Expect your firm to offer a range of cars limited to those producing less than 95g/km from April.

So, as a company car driver, you’re likely to have less choice when it comes to your next vehicle. But even the enjoyment you get out of your current vehicle may be stretched, given the concurrent news of company car tax rises for business drivers.

If your car emissions sit above 95g/km, the tax you pay (known as benefit in kind) will increase by 1% as of April. The following year, another 1% rise will come in, and another in 2015.

Indeed only zero-emission cars are exempt from company car tax altogether, so go green to avoid handing over yet more hard earned cash. But be warned – in 2015 these exemptions will end, and even the cleanest, greenest company car will be taxed at 13% of its value.

Remember to get your specialist company car insurance at QuoteRack. We have brokers ready to provide a quote for your company car cover today.