Thinking about changing your company car in the near future? Hold your horses! You may want to take advantage of new tax rules which come into force on 6 April 2020.
HM Treasury announced in July that benefit-in-kind (BIK) tax will be changing in the coming tax year to favour low and zero-emission vehicles. So if you drive a greener car from April 2020, you’ll get some pretty awesome tax breaks.
Let’s talk figures. At the moment, the BIK rate for an employee or director driving a company car is up to 21%. But after the changes, drivers of ultra-low emission vehicles (ULEV) will see that slashed to 2%.
And drivers of pure electric vehicles (EV) - which are classed as zero-emission for tax purposes - will pay no BIK whatsoever. Sweet nothing.
There are also government grants available for pure electric cars. Originally £4,500, these have since dropped to £3,500. And the £2,500 subsidy for plug-in hybrid cars has been stopped entirely - due to the overwhelming demand.
A grant of £3,500 for an EV is still not to be sniffed at though. Eligible cars include the BMW i3, Nissan Leaf, Jaguar I-Pace and Renault Zoe.
Let’s say you’ve got your eye on an ever-popular Toyota Prius, which is a mainstay in the world of hybrids. At around £24k new, you could be looking at up to £5,040 in BIK tax if you buy today.
Once you’ve picked yourself back up from the floor, we’ll be happy to tell you that - if you wait until the 2020/21 tax year to buy and register your company car - that plummets to £480. So that’s a whopping great saving of £4,560. Definitely worth the wait.
The target for all vehicles in the UK having zero emissions is 2040. This is intended to combat issues regarding poor air quality, such as the high rate of illness and death due to particulate air pollution.
Reducing the overall emissions from vehicles will also hopefully help to tackle worsening climate change.
Not only that, but this is hoped to give a boost to ULEV and EV manufacturers, and spur growth in the UK market.
Whether you’re self-employed or the director of a growing business, it always pays to be on top of your taxes. And using a reputable accountancy service could save you loads of time and money to boot. Well, that’s what Mazuma’s here for! To find out how we can help you with your finances, please feel free to contact us with no obligation.
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