When you first get offered a company car, you may begin to see this as a huge bonus. However, company cars aren’t always the great option that they seem on paper, so it is always important to evaluate everything before you agree to it. However, not all companies are the same, and because of this, you may find that your company is offering you a fantastic company car which will really benefit your needs and daily life. We’ve put together a list of the benefits and drawbacks of a company car.
In some large firms, employees will have company cars. In other firms, employees may have some form of an allowance which will ultimately be taxed at a normal rate as it is paid as part of a salary. The tax on company cars can be quite difficult to understand, so we have broken it down to help you. If you or your family use your company car privately or even just for the commute, you will be made to pay tax on the car. This tax is based on the value of the company car, which will depend on things like how much it would cost to buy, and the type of fuel that the vehicle uses. The tax on the car will gradually be reduced if you have it part time, pay towards the cost of the vehicle, or if the car has low CO2 emissions. If you do use your company car for personal journeys, and your employer pays towards this, then you will be taxed separately.
It is always important to check and update company car tax if you get a company car for the first time or give one back, or if your employer starts or stops paying for fuel for personal use. This can all be done through the HMRC. In 2015, cars with low emissions began to be introduced in order to ensure that the company car tax was lowered. In some cases, the driver will be asked to sign a company car policy which means that they will have to look after the car in terms of maintenance, so they have to look out for the best deals on car tyres in Rainham and other areas across the UK – which is an additional expense.
While company cars seem like a positive option, there is an alternative which can help to stop you from paying company car tax. This is known as company car allowance, and this allows both the company and the employee to benefit. Car allowance removes the cost term issues and administration of the running of a company car for the business, and the driver essentially receives a form of a pay rise based on cash that they would have otherwise spent on company car tax.
This also allows the driver to buy their own car, by using conventional funding methods or through a personal contract purchase (PCP) or personal contract hire (PCH). This then allows drivers to use their own car for business, while covering their motoring costs by claiming tax and mileage Authorised Mileage Allowance Payments. Not only does this make it far more versatile for the driver allowing them to pick the car that they want, but also helps to reduce the cost by reducing company car tax.