Bumpy road ahead for company car drivers

  

For 2012–13 the fuel charge multiplier is increased from £18,800 to £20,200. Even allowing for rising fuel prices, this throws a serious question mark over the ‘benefit’ of free fuel for private journeys and many drivers may be better off shunning free fuel and taking a cash alternative instead.  Further significant increases in this multiplier are expected in future years, particularly if the fuel price inflation experienced over the last couple of years continues.  The Government is already committed to annually increasing the multiplier by at least two percent above inflation.

 

Changes in the emissions bandings and tighter thresholds will increase the tax cost of a company car even if the company car driver does nothing. Somewhat ironically, a company car driver who has the same car as he had in 2011–12 will pay more tax for the privilege in 2012–13, despite the fact that the car will be one year older and have more miles on the clock!

 

The ‘green’ considerations that have been evident within recent tax legislation are supposed to reward those that make environmentally friendly choices with lower tax bills. However, somewhat ironically it is the drivers who have done just that who will be hit the hardest come 2015–16. From 6 April 2015 the five-year exemption for zero-emission cars comes to an end and those drivers who opted for electric company cars are in for an abrupt tax awakening. From 2015–16 the appropriate percentage to be used in computing the cash equivalent car benefit for all cars emitting less than 95g/km, including zero emission cars, is 13 per cent of list price when new.

 

The rising tax cost will affect both company car drivers and their employers, who will pay higher levels of Class 1A National Insurance as the cash equivalents of the benefits increase. It is advisable to review the provision of company car & fuel benefits in kind before these changes come into effect and to evaluate the extent that these remain a ‘benefit’.
 
If you would like more details on company car tax or alternatives to the company car and the tax implications then please contact a CFW partner. 

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