Understanding Company Car Tax
Get a better understanding of company car tax with Artema Accountants in Bournemouth and Ringwood. Contact our team if we can help any further.
Using a company car for personal use is known as a Benefit In Kind, and you pay tax on this viawhat’s called a P11D return – the deadline for submitting this is the 5 July each year.
The amount of tax you pay for a company car depends on your marginal income tax rate, the cash value of the vehicle as well as it’s CO2 emissions..
You begin by taking the cash value of the vehicle, including any optional extras, this is known as the P11d value. Then, depending on the CO2 emissions of the vehicle, there’s a Benefit In Kindtax rate applied to the vehicle’s value,, this amount is then assessed to income tax and collected via payroll.
Electric vehicles produce much lower levels of CO2 emissions so have considerably lowerbenefit in kind rates which could reduce your tax liability significantly..
For example, a basic rate taxpayer with a petrol company car valued at £20,000 and a 15% Benefit In Kind tax rate would mean that £3,000 is taxable – which is 15% of the value. Then, assessed to the income tax rate of 20% gives an annual tax bill of £600, whereas it would be £200 with an electric vehicle.
This post was made specially for Artema, goal centred accountants by The Money Movement.