If you’re thinking about changing your company car/cars in the near future, you may want to wait until 6th April 2020 when some new tax rules come into effect.
These new tax rules will significantly favour low and zero-emission vehicles, so if you start driving a green car from April 2020, you’ll be benefiting from some pretty great tax breaks.
Exactly how much could you save by driving a greener vehicle? Quite a lot as it turns out. Currently, the benefit-in-kind (BIK) tax rate for vehicles can be anywhere between 16% and 37% (depending on emissions). Under the new rules, ultra-low emission vehicles (ULEV) will be taxed at just 2%. And drivers of zero-emission vehicles (such as pure electric cars) will pay no BIK whatsoever.
To put this in perspective, if you were to buy a brand-new Nissan Leaf today (currently around £32k), your company would pay £706 in National Insurance on Employee Benefits. However, should you wait until the 2020/21 tax year to buy a Nissan Leaf this drops to £0. That’s right, sweet nothing. On top of that, the car will qualify for 100% First Year Allowances entitling you to a further £3,938 in Corporation Tax Relief. See, we told you there were some big savings to be had.
You’ll also be eligible to claim any company related expenses that occur during the use of the car including but not limited to, costs associated with charging, car repairs, car MOT and car service costs. Plus, company cars are a really good way of keeping your employees happy by bolstering their remuneration packages.
It doesn’t stop there though, there is a £3,500 government grant available for pure electric cars such as the already mentioned Nissan Leaf, BMW i3, Jaguar I-Pace, Renault Zoe and even a Tesla Model S!
If you can ensure that the vehicle is NOT available for private use (a pool car) then your company may also be entitled to claim back the VAT on the car, securing a further 20% saving on the cost of the car.
If you were to use a combination of all the above reliefs and grants, we have calculated that the cost of a brand-new Nissan Leaf with a cost price of £32K as above would likely cost the company £19,228, that’s 40% off of the original cost.
The reason for this change? The UK has until 2040 for all vehicles to be emission-free if it’s to meet its target. With such a bold target, drastic changes must be made. This change to BIK will no doubt be the first of many.
If you would like help with anything mentioned here, please contact us.