If you have use of a mid range company car then the amount of tax you are likely to pay over the next 3 years will increase considerably?

Fo example, say you have a company car with a C02 rating of 103 and the market value when new was £28,000. Then the taxable benefit in 2016/17 for this petrol car would be £4,760. In 2019/20 the taxable benefit is likely to increase to £6,720. If you are a higher rate taxpayer then this will result in a tax bill of £2,688.

So it is important to determine the likely increase in your tax bills over the next 3 years so that you can assess whether to continue to use the same company car

One option to consider is for the company to purchase a new  electric  car as it will be able to receive 100% capital allowances which will reduce the corporation tax liability accordingly. Also, the taxable benefit percentage is greatly reduced. So if the new electric car cost £28,000 the taxable benefit in 2016/17 would be £1,960 which is a lot more attractive!

Another option is to use a company van rather than a car. If there is no private use or the van is only used to get in and out of work then there is no taxable benefit. Also the company can receive 100% capital allowances and reclaim the input VAT if it is VAT registered – A win win situation

It maybe advantageous not to have a company car but to use your own car and claim HMRC’s tax free mileage allowance. If you did 10,000 business miles per year then the company could pay you £4,500 tax free. You would then use the £4,500 to pay for all the running costs of the car which you would incur personally.

So there are many option and it is always important before you take any action that you obtain professional advice. If you have any questions in respect of the above, then please do not hesitate to contact our tax experts by sending an email to kevin@kwaccounting.com