As if not already complicated enough, changes to company car tax in 2015 have made it even more complex bringing ever more cars and drivers into the tax calculation
Firstly, what is company car tax?
A company car is a perk or put simply, money you don’t have to pay to lease your own car and is additional pay in the eyes of the Inland Revenue. Tax is payable on all pay. Company car tax is calculated taking into account the emissions of a vehicle, your new company car price including extras, whether it is petrol or diesel, how it is paid for and how it is used
Some rate changes
Take the example of one of the lowest polluting cars, a BMW i3 Range Extender. Like all cars that produce less than 50g/km CO2, it will attract a benefit in kind, BIK, of just 5%. Notice that this car, along with 100% electric cars have now been included at 5% BIK, up until this year, no company car tax was payable in this class
In the case of something producing over 220g/km, the BIK rate has been lifted from 35 to 37%. Further discouragement by the government to operate gas guzzling cars as company cars
In this category, a 2% hike is unlikely to have much effect but the tax difference between 37% BIK and say a Mercedes Hybrid at the lower rates, may lead to a rethink on choice of car
Ever lowering targets
Just a few years ago, a clean car had emissions of about 110 g/km CO2. Government/European emissions targets and clean city policies have driven manufacturers to achieve ever lower emissions and cleaner running cars. Probably the highest profile and best known of all of these is the Toyota Prius.
Although the Prius is without doubt an Eco-Lease car, with emissions of less than 90 g/km CO2 and an average fuel consumption of 70 mpg, it now attracts a BIK tax rate of 9%
More revenue than ever
Well maybe. The BMW 320d ED, at less than 110 g/km, now has a BIK of 19%. It is obvious that tax on a company car is rising. But, with all cars getting cleaner every year, BIK has got to rise to simply stay in line and keep tax income steady
Benefit in Kind now drives company car decisions more than ever
For any given car, you will pay more tax than ever. The hope is that this will lead to drivers choosing cleaner, more efficient cars. This link on the government website allows you to work out your tax payable for any given car.