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Company cars and vans

Taxable benefit of company cars

Company cars are taxed in a variety of ways. All of them expensive.

If your car was registered on or after 1 January 1998 it will have a CO2 figure, unless it was imported from outside the EC. You can find this on the V5. Once you have the CO2 figure you just look up the relevant percentage on a table and multiply it by the list price (including first registration fee and all accessories, but excluding RFL, and before deducting any discount) of the car.

Fuel benefit

Fuel benefit is calculated by applying the relevant percentage, for cars with a CO2 figure, by a set figure. For 2014/15 the figure is £21,700.

An example

A diesel car originally cost £19,000 after a discount of £1,000. The price included RFL of £165 and first registration fee of £30. The list price is therefore £19,835. The CO2 figure is 125. The relevant percentage for the year ended 5 April 2015 is therefore 21% and the annual taxable benefit is £4,165. If private fuel is paid for (in ANY amount) the fuel charge is an additional £4,557.

In additional the employer pays Class 1A NI currently at a rate of 13.8% of the taxable benefit.

Classic cars

Same as cars registered before 1 January 1998 but you can only use original list price if the car is worth less than £15,000.

If you have a classic car that is over 15 years old and it's market value is less than £15,000 then you are taxed as described above. The numbers are made up but here is an example. You have a 1973 car which is in good condition and has an engine over 2 litres. It is currently worth £10,000 but in 1973 its list price was £800. You use it for a small amount of business. The taxable benefit on you is £280 per year. You sell it to your company at its current value of £10,000 and it costs £2,000 per year to maintain and run. In the first year the company can deduct costs of £4,500. Not bad against a £256 taxable benefit.

Beware any increase in market value. If the market value goes up because you spend money to improve it or the market in that type of car improves and it becomes worth £15,000 or more either on the last day of the tax year or on the last day the company provided it to you then you are taxed based on the current value and not the original list price. Ouch!

You should really have some business use of the car to establish that it was necessary for the company to buy you such a car.

Taxable benefit of company vans

If you can put up with it a van is very tax efficient.

Currently the taxable benefit is £500 per year or £350 for older vans. From 5 April 2005 the van benefit will reduce to zero if the van is used mainly for business travel and other use, other than to and from work and home is insignificant. If you claim the taxable benefit is zero you will have to be able to prove it!

Van benefit in kind is revised from 6 April 2007. There will be a nil rate band where the employee has to take the van home but no other personal use is allowed. Otherwise there will be a flat rate £3,000 per year benefit charge plus £500 for private fuel.

In brief...

Coming Soon

The Chancellor's Autumn statement. Watch out for more tax changes for small businesses. He threatened it in the last budget, there is likely more to come. In full... »

About Us

Our principal is a Chartered Accountant with thirty-five years experience. Mike qualified with Deloitte Haskins & Sells, now part of PriceWaterhouseCoopers, in the UK in 1982 and spent five years in the USA, with Deloitte & Touche in Minneapolis, where he qualified as a CPA in 1983. In full... »