Company Cars

There is a lot of talk these days about going green, carbon footprints etc. As a small business you’d be forgiven for thinking that the tax breaks to encourage “greener” living are just for the likes of ICI and other large industrial companies, but the Revenue have introduced a generous scheme to encourage small business owners to do more for the environment.

The scheme concerns Company cars. Historically providing a company car to an employee has been very expensive from a tax point of view but no longer – at least for certain cars. Those cars which have CO2 emissions of not more than 75g per kilometre driven qualify for 100% allowances within the Company – this means that if the car costs £20,000 you can offset the whole amount against your Company profits in year 1. 

The benefit in kind charge (the tax payable by the employee) is also reduced to 11% of the list price of the car for cars with a CO2 emission rate of 51 - 75g/km (as of 6 April 2016) and 7% with a CO2 emission rate of 0-50g/km. These rates are increased by 3% for diesel cars due to a 3% diesel supplement. The benefit in kind charge for electric-only cars is calculated at 7% of the list price.

How then does this relate to actual tax savings? Take the example of a Toyota Prius with a list price of £20,000 and a CO2 emission rate of 75g/km. In year one the Company can write off the whole cost of the car against its profits, meaning a tax saving of £20,000 x 20% i.e. £4000.

The benefit in kind on the employee would be £20,000 x 11% = £2,200. This would cost a Higher Rate tax payer £880 in tax with the Company paying an extra £303.60 a year in Class 1a National Insurance.

This then is a tax saving in year 1 of £2,816.40 Remember as well that the Company will pay for all the repairs, tax, business fuel and insurance on the car, reclaiming VAT where applicable and obtaining corporation tax savings on all costs.

So, the tax breaks are good, but are the cars that qualify worth the extra savings? Personal choice of course, but you may want to check on the following link for further details and to check those currently available www.green-car-guide.com.

If you have any question about contracting or would like any further advice please call our new client services helpdesk on 0500 152500 / 01442 275789 or email:jessica@sjdaccountancy.com

Appoint SJD Accountancy and never worry about your tax or accountancy affairs again!

SJD Accountancy

SJD Accountancy are the UK's largest specialist provider of fixed fee, Limited company accountancy services to contractors; we've been acting for contractors across the UK since 1992 and have more than 15,000 clients.

We are the only national specialist firm of contractor accountants with offices nationwide. SJD Accountancy has more qualified staff than any other firm in our market with qualifications from the following major tax and accountancy bodies - ATT, AAT, CTA, ACCA, CA, ACA and FCCA.

  • Unlimited face to face meetings. This is a unique service only SJD Accountancy offers - unlimited face to face meetings across the UK - tax is complicated and sometimes only a meeting will do.
  • UK's Largest contractor accountants with more qualified staff. No call centres, no outsourcing, no automated call handling. Simply telephone, email or meet your own dedicated accountant* face to face.
  • Money back service guarantee. All your telephone calls and emails will be answered the same day or we will make a full refund of that months fee.
  • Outstanding reputation. We have won more awards for customer service and accountancy excellence than any other firm in our market, including: Best Accountant for Contractors, Accountant of the Year and Best Professional Service Team to name just a few.
  • All inclusive low cost fixed fee accountancy package which includes completion of accounts*, payroll bureau, dividends and corporation tax computations, personal taxation, free bookkeeping software, your own dedicated accountant* and all company returns for a fixed fee of £120 plus VAT per month.

If you have any questions about contracting or would like any further advice please call our new client services helpdesk on 01442 275789 or email: janice@sjdaccountancy.com. Our new client services helpdesk is open Monday to Friday (8am to 6pm).

Appoint SJD Accountancy and never worry about your tax or accountancy affairs again.

Form your own Limited company with SJD - our same day online company formation service includes company bank account set up, VAT/PAYE registration and advice on optimum share structure. 

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*If you would like us to complete your company year end accounts we simply ask that you have been a client of SJD for one year or have made 12 monthly payments. All accountants are part or fully qualified.