Company car tax bands. Why looking forward has never been more important.

Tuesday, May 24, 2011

For your drivers, selecting a new car can be quite a task.

To arrive at a short-list of cars they examine the rules and formula closely, working out how to minimise their Company Car Benefit-in-kind taxation.

Having found a nice list of sub 120 g/km cars they will be delighted there is still a good choice, including upper-medium sector diesel product such as Mondeo, Passat, 508, S60, Superb and even a few C-Class and 3 Series saloons.

In short there’s pretty much something for everyone.

And the best part is that before applying the 3% surcharge on diesels, sub 120g/km CO2 emissions means a Benefit-in-kind rate of 10%.

So they can pay tax on a BIK value that is just 13% of the P11D price – for a £25,000 diesel car thats a BIK value of £3,250.

Even for 40% taxpayers that’s a very low Tax bill of £1,300 in the current 2011-12 Tax Year – a highly economical £108.33 per month.

Job Done?

Well, only until the tax bands change.

In 2012-13 the 10% band becomes 14% – plus the 3% for diesel takes it up to 17%. Then a further 1% rise in 2013-14 makes 18%.

In the third year this produces a rather larger Benefit in-kind Value of £4,500 shifting the monthly cost from £108.33 to £150 – a 38% increase.

If you provide drivers with information on company car tax this is one you should really be watching out for.