A company car is helpful as it can be used for both personal and business use. Remember that you may be responsible for paying the tax if you use the company car for personal use.
How to Calculate your Company Car Tax
For an accurate calculation of your company car tax, employees and employers can use a company car tax calculator. The tax calculator is provided by company car leasing companies like ALD Automotive. With this, you can monitor your car and fuel tax when you use the car for private trips.
What is the Basis of Tax on Company Cars?
The tax you pay for the company car depends on several factors which include:
- The actual price of the car and accessories (if any)
- The approved CO2 emission guides of the car
- The amount of fuel the car uses
- Whether or not you pay a lump sum for the car
- Whether there are any payments to the company for the private use of the car
If I only Use the Company Car for Business, do I still have to pay the Tax?
There is no need for employees to pay the tax if the car is only used for business purposes, such as meeting clients or going back and forth from your house to the company location. In this instance, the company is liable for the payment of company car taxes.
How Can I Prove That I Don’t Use the Company Car for Private Purposes?
The employer is responsible for keeping the records of the company car. On the other hand, the employee should also keep accurate mileage records to prove that the car is used for business purposes. The distance from the employee’s home to the work place is recorded and car maps are also provided. So, the employee should make sure that they don’t go beyond the limit. In addition, company cars can be equipped with a GPS, allowing the company to monitor the car’s whereabouts.
Are There Any Exemptions for Paying the Tax for Company Cars?
The answer to this is, yes! In the UK, the exemption includes the following:
- If ever the employee earns less than £8500 per year, they should be exempted from paying the tax
- If your company provides the employee with a van, it can be used for private purposes as long as the fuel does not exceed £500, annually
If you have any more questions regarding Company Car Taxes and other car leasing related queries, please do not hesitate to call us at ALD Automotive, on 087000 111 81.
d also keep accurate mileage records to prove that the car is used for business purposes. The distance from the employee’s home to the work place is recorded and car maps are also provided. So, the employee should make sure that they don’t go beyond the limit. In addition, company cars can
A salary sacrifice is one way to reward your employees for their hard work. It works by effectively managing and reducing their gross income, in exchange for signing a car contract. Your employees will be able to enjoy a new, fully insured car that has a low carbon footprint – usually at a low cost. Additionally, your employees will also save on tax. The good news for employers granting a salary sacrifice is that it increases the loyalty and motivation of employees, plus, it will also increase your company fleet, entitling you to a larger manufacturer discount (granted that all the cars come from the same manufacturer or company). Before we proceed to the advantages of salary sacrifice, how does salary sacrifice reduce tax?
Tax Reduction for Employees
Let us assume that James and Chris (fictitious employees) both work in the same company, both of them earning £50,000 a year. James makes a salary sacrifice of £10,000 for a vehicle. Chris, however does not sacrifice any of his salary.
Note: all values stated are purely imaginary and are a means to show the tax benefits afforded by a salary sacrifice. Other variables are not included in the computation.
|Income Tax (12%)||(£4,800)||(£6000)|
Based on the table, we can clearly see that Chris ends up paying more tax than James. This is because a salary sacrifice reduces the taxable income before the tax deduction, resulting in a lower tax payment. Not only does James gain a new car, he also saves on tax.
Advantages of a Salary Sacrifice
- Affords tax discounts by effectively reducing the taxable income.
- There is no capital and deposit required. Once the employee agrees with the salary sacrifice, that`s about all that`s required.
- There is no need to save money and wait for a long period of time before getting your vehicle – you can get the car right away and at a lower price.
- Salary sacrifice vehicles are invariably brand new, with at least 3 years warranty and maintenance cover.
- There is no need for the employee to go to the car manufacturer to make the monthly vehicle payments. Payments will automatically be deducted from the employee’s salary.
- It comes with a Guaranteed Auto Protection (GAP) insurance that covers the value of the car on the date of purchase. Most insurance companies only cover the market value (current value) of the car. Therefore, GAP would be most advantageous. For example, an employee buys the car for £10,000 using salary sacrifice. If in two years, its value drops to £8,000. GAP policies will cover the £2,000 difference in current value and the car will still be deemed to be worth £10,000.
- There is a low risk involved since the salary sacrifice management comes from the third party company. There is no additional management needed from the employer`s side. The fleet is also handled by them, with no need to hire additional employees to handle all the transactions and fleet management.
- Granting a salary sacrifice in exchange for a new car will boost employee morale. It will make them work harder and more efficiently, which translates into better output and ultimately more income.
For the employers, before you get into this kind of an agreement, it would be wiser to choose a company that is noted for its fleet management services. A good company will provide a lot of options and plans that not only benefit you but also your employees in the long run. ALD Automotive is a leading fleet management company, known for its excellent fleet management and vehicle leasing solutions. Whatever your vehicle needs, ALD Automotive can deliver.