It is always good to look ahead when choosing a company car, as the amount of tax the driver has to pay on their ride generally increases each year.
The Government argues that, as the technology for engines improves, the tax system should encourage companies to switch to cars with lower CO2 emissions. A driver may, however, be stuck with the same car for four years or more, during which the taxable benefit will rise while the value of the car decreases.
This is true for petrol and diesel cars, but from 2020 electric and hybrid cars will be favoured by the tax system.
Rick, Sally and Fred are each provided with a new company car on 6 April 2017 which has a list price of £20,000. Rick’s car has a petrol engine with CO2 emissions of 110g/km. Sally opts for a purely electric car. Fred has range anxiety, so he chooses a hybrid petrol/ electric car which has a range of 100 miles on its electric power and CO2 emissions of 50g/km.
|Petrol car % list price:||21%||23%||26%||27%|
|Rick’s taxable benefit:||£4,200||£4,600||£5,200||£5,400|
|Electric car % list price:||9%||13%||16%||2%|
|Sally’s taxable benefit:||£1,800||£2,600||£3,200||£400|
|Hybrid % of list price:||9%||13%||16%||5%|
|Fred’s taxable benefit:||£1,800||£2,600||£3,200||£1,000|
The taxable benefits for each car in the next four years are shown in the table. Sally and Fred will benefit from the change in the structure of company car tax from April 2020. Hybrid cars will be taxed at lower levels if the electric engine has a longer range. A hybrid with a range of 130 miles or more will be taxed as if it were a purely electric car.