For a considerable time, the ‘end of the company car’ has been talked up by fleet experts and the fleet media. Supporters of this position point to HMRC figures suggesting that drivers with company-provided vehicles reduced by some 50,000 year-on-year (although HMRC says that a new method of calculating the figures may have led to this distortion).
True or not, the rising cost of benefit-in-kind taxation has certainly driven many former company car drivers into taking the cash offering as a more tax effective alternative.
But today, in COVID-19 Britain, with furloughing and job insecurity rife, suddenly that DIY cash for car option looks more like a financial burden than a clever tax saving.
New benefit-in-kind taxation makes company car attractive
Favourable changes to the benefit-in-kind position of ultra low emission and zero emission vehicles from 06 April 2020, with either no tax or very low tax payable, along with no or little Class 1A National Insurance Contributions, have made it more attractive for both individuals and employers to consider company cars rather than a cash alternative.
For example, under the taxation changes introduced in April, a zero emission vehicle is rated at 0% benefit-in-kind company car tax for the tax year 2020/21; 1% in 2021/22; and 2% in 2022/23.
An ultra low emission plug-in electric hybrid (PHEV) vehicle is rated at 8% BIK over the same period if it is able to travel between 40 and 69 miles in zero emission mode; or if the PHEV travels between 30 and 39 miles, the BIK goes up by four percentage points to just 12%.
For drivers that also means the benefit of a fully expensed vehicle, without the monthly commitment of personal contract hire payments. The drain on personal finances does not stop there, of course: there’s also accident damage, insurance, and maintenance to add to the personal outgoings.
There are benefits for employers. There is the opportunity to provide a meaningful recruitment and retention tool to employees that also provides a positive environmental message about the company. Meanwhile the business benefits from lower whole life costs thanks to reduced or zero fuel expenditure and much lower maintenance costs.
Want to know more about choosing or offering a company car?
Our leasing experts at CBVC Vehicle Management can assist you with the taxation and whole life cost benefits of running zero and ultra low emission company cars. Call us on 01283 351200 to find out more.