"Only two things are certain in life: death and taxes" Lets talk company car tax
Company car tax, or Benefit in Kind (BIK) appears a complex world on the surface, but Pendle have put together an easy to read guide to make understanding BIK before you go ahead with your business lease more straight forward.
Why is there tax on a company car?
Not everyone gets a company car and it is quite a privilege to be given one and are often used by businesses to reward and retain staff. In the eyes of the government and HM Treasury these are seen as an additional taxable benefit that are not taken into consideration in your standard National Insurance tax contribution. HMRC see a company car as an additional perk and bonus on top of you annual salary. This is what is called Company Car tax/BIK. The amount of tax that the government decides to take from you changes each year and is announced annually in The Budget. Cleaner cars with lower CO2 emissions pay less tax in order to encourage businesses to lease or purchase greener cars. The official .gov website states that you will pay tax if you or your family use a company car privately, including commuting.
How is BIK calculated?
There are many specialist websites out there that will allow you to calculate the company car tax before going ahead with you contract hire lease. Pendle recommend taking a look at calculator from the HMRC. Put simply, it is calculated based on the list price of the car (excluding first year's road tax, first registration fee) including options, which is referred to as the P11D value. and your personal tax rate depending whether you pay 20%, 40% or 50%. On top of this, the fuel type of the car is taken into consideration in the calculations.
Diesel Cars
As if the world of diesel cars wasn't complicated enough, there is an additional surcharge in BIK for diesel cars. As of 6 April 2018, there is a 4% surcharge on any and all diesel makes and models that do not meet the 'real-world' driving section (RDE2 WLTP) of the WLTP regulations. Before you start looking for lease cars that meet this standard, none currently do due to this regulation not being fully implemented until 2020 and hardly any cars actually being tested. So we can expect HMRC to make some more changes to RFL and BIK in 2020.
Electric and Hybrid Vehicles
We love electric and hybrid leasing at Pendle Vehicle Contracts. Make sure you head over to our Eco Leasing page and find some fantastic contract hire offers for both business and personal contract hire. Historically, fully electric vehicles (EVs) were tax exempt! But, of course, nothing is ever tax free. HMRC now charge BIK on EV and hybrid vehicles, but at a considerably lower rate than on diesel or even petrol cars. This makes hybrid and electric vehicles the go to choice for businesses looking to lease company cars. And it makes perfect sense.The current CO2 bands
| CO2 (g/km) | 2018/19 BIK rate (%) - Petrol | 2018/19 BIK rate (%) - Diesel* |
| 0-50 | 13 | 17 |
| 51-75 | 16 | 20 |
| 76-94 | 19 | 23 |
| 95-99 | 20 | 24 |
| 100-104 | 21 | 25 |
| 105-109 | 22 | 26 |
| 110-114 | 23 | 27 |
| 115-119 | 24 | 28 |
| 120-124 | 25 | 29 |
| 125-129 | 26 | 30 |
| 130-134 | 27 | 31 |
| 135-139 | 28 | 32 |
| 140-144 | 29 | 33 |
| 145-149 | 30 | 34 |
| 150-154 | 31 | 35 |
| 155-159 | 32 | 36 |
| 160-164 | 33 | 37 |
| 165-169 | 34 | 38 |
| 170-174 | 35 | 39 |
| 175-179 | 36 | 40 |
| 180+ | 37 | 41 |
There you have it, Company Car Tax explained. If you are still unsure whether it is best to take a company car on business contract hire, or take allowance (if permitted) and take out a personal lease deal then Pendle recommend speaking to an accountant or financial adviser who will be able to assist you on a personal basis. Pendle look forward to hearing from you when you have made the decision on a lease deal.
