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Tax Insider Tip: Company Cars – The CO2 Rating

3rd Feb 2016
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Because the car benefit charge and fuel scale charge are linked to the carbon dioxide emissions from the car, consider changing to a lower emission company car and you can save considerable amounts in tax.

For more detailed information and the tax rates please use the following link www.gov.uk/calculate-tax-on-company-cars to view the guidance on the GOV.UK website.

Example:
Bill is a higher rate taxpayer and pays tax at 40%. He works for ABC Ltd. He has a company car, which is available for private use throughout 2015/16.

By switching from a car with an emission rating of 210g/km to one with a rating of 135g/km, the taxable benefit on a £20,000 list price car changes from £7,400 (37% of £20,000) to £4,400 (22% of £20,000) (2015/16 figures).

The reduction in the benefit reduces the tax payable from £2,960 (£7,400 @ 40%) to £1,760 (£4,400 @ 40%) and saves tax of £1,200. The employer would also save Class 1A National Insurance Contributions of £414 (13.8% (£7,400 - £4,400)).

If fuel is also provided, the fuel benefit would be reduced from £8,177 (37% of £22,100) to £4,862 (22% of £22,100), reducing the tax payable on the car fuel from £3,270 (£8,177 @ 40%) to £1,944 (£4,862 @ 40%), saving further tax of £1,326. The employer would also save Class 1A National Insurance Contributions on the fuel benefit of £457.47 ((£8,177 - £4,862) @ 13.8%).

By choosing a car with even lower emissions, higher savings can be achieved.

 

This is a sample tip taken from our 136 page guide:
101 Ultimate Tax Strategies Revealed.

Click here to receive a free copy of this tax saving guide today!

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