Being associated with a company comes with its own perks and benefits. One of the prominent perks that people dream about is getting a company car for the sake of managing the commute to the workplace. And getting the perk from your company paying for the pair of wheels that you can drive even outside is even better. However, before you plan to jump to a conclusion, it is imperative to become aware of the company car tax and other such obligations when you receive the vehicle from your company finally. Moreover, you can be in the role of an employer another way to choose a company car offered to a new employee or you can be interested in picking a vehicle for your personal use, be considerate about keeping the car cost low.
Furthermore, when you keep the company car tax low, you are keeping yourself away from expensive mistakes indirectly. There are certain facts that you can not prevent just like giving a share to the taxman, However, if you handle the scenario professionally, you will find short-changed possible ways. Based on the frequently asked questions, we will focus on providing solutions for bringing the company cost does when it comes to the car tax. Along with the discussion of how company car tax works for you, how to make the calculations, and what are possible ways to reduce the company car tax.
Reach out to one of our professionals to get to know about better handling of tax affairs in the UK.
How Does Company Car Tax Work?
This is common about the company cars and relevant perks that these benefits come with the obligations of tax payments. Now the car that your company has provided you as a perk with the job that you can use for the commute and personal use will be considered as benefits in kind. This is how HMRC views it and it brings in income tax obligations as well. Whether the car is being used for private use or not, nearly all company cars come under the responsibility of tax. According to HMRC, a company car is a financial benefit from the company which will be taxed separately from the regular salary matters.
Since the taxes are generally deducted from the salary even before it reaches the employees, seeing a tax increase because of getting the company car is the last thing an employee will want. However, the point of view of HMRC is different here. As they claim to do it to avoid any kind of tax evasion and handle loopholes that can cause damage to the tax system. You will have to deal with an increase in tax on the way to getting more perks from your company.
How to Calculate Company Car Tax?
The criteria for calculating the company car tax are a bit different. There is the involvement of three different factors that will help to decide how much tax you owe to HMRC. P11d value, CO2 emissions tax band, and the personal income tax band are considered to reach an accurate calculation result. Here P11d refers to the price of the vehicle without considering the VAT registration fee and any charges of VAT. If this value is high in the calculation, that explains that you will have to pay more tax.
Then comes the second factor which is known as CO2 emissions. If you fall into the higher band you will again end up paying more tax. Your income tax bracket will be considered lastly, which will decide the final amount of tax that you owe to HMRC.
What is a Handful of Company Car Tax Exemptions?
People tend to expect more in finding tax exemptions when it comes to the company car. There are a few exceptions possible in this regard. There are more exceptions than only will work for the employers, partners and business owners. Very few options are applicable to the employees as well. Let us take the instance of a car that is being used for business purposes or being used for the purpose of mobility strictly, you do not owe any tax to HMRC in this case.
Moreover, you use the car only for business purposes and the car stands on the business premises during your working hours as well as over the weekends. This means you will not pay any tax in this scenario also. In the case of pool cars that are shared for business use, the exemption will be applicable.
What is the Possible Way to Reduce Company Car Tax?
You do not have to worry if you do not find yourself in a position to get the tax exemption for your company car. There are several strategic choices that can help you to have control over the car cost of tax. As discussed earlier, three factors are involved in the cost of the company car. We are in a better position to control two of them. This explains that you must opt for a car that has a low P11d value and also low CO2 emissions.
1- How CO2 Emission Bands can Help
All you need to be focused on is to opt for a company car that is low in CO2 emissions. This is because of the fact that the fuel type your company car consumes matters a lot in increasing or decreasing the cost to the company.
2- Reducing the p11d Value Will Work
Many people confuse this way with choosing a low-quality model of car. However, this is not the case at all. Having a good awareness of the P11d, you will choose a car that has no extras and a comfortable daily ride too.
The Bottom Line
Now that you have gathered a fair amount of information about the company car tax in the UK, we can bring the discussion towards wrapping up. Reducing company car tax will always be beneficial whether you are in the role of an employee or employer. You will have to be considerate about the possible ways just like a conscious decision about choosing a low P11d and low CO2 emissions vehicle.
Get in touch with our young, clever, and tech-driven professionals if you want to choose the solution to tax burden or accounting problems in the UK for your income. We will ensure to offer the best services.
Disclaimer: The information about how to reduce company car tax in the UK provided in this blog includes text and graphics of general nature. It does not intend to disregard any of the professional advice.