Taxing decisions to be made on company cars

Tax-efficient Volvo V40 D2.

Tax-efficient Volvo V40 D2. - Credit: Volvo

Fleet operators and company car drivers should think ahead to April tax changes, says Halesworth Volvo dealer M R King & Sons.

Since April 2002, company car tax has been based on a car’s list price for tax purposes and CO2 emissions. However, fleet operators need to take a close look at forthcoming CO2 bandings due to change in April this year to ensure they opt for the most cost-effective company cars.

With fleet managers and company car drivers choosing vehicles with reduced costs in mind, from fuel economy to future values, and with an eye on lower CO2-emitting vehicles to secure a lower benefit-in-kind (BIK) tax band, they’ll need to be aware of the adjustments which come into force in April.

Employees need to keep an even closer eye on emission levels as the BIK bracket changes will see all vehicles attract higher employee contributions. Diesel and petrol BIK rates for 2014-15 will increase by two per cent, incurring an increased tax payment as the government imposes stricter emissions targets. This affects both employees’ BIK payments and the amount of Class 1A National Insurance (13.8pc) paid annually by employers.

Meanwhile, capital allowances, the tax writing-down payment against the cost of buying cars also changes. Currently, cars emitting less than 96g/km CO2 benefit from a 100pc annual tax write-down in the first year, but this reduces to vehicles in the sub-76g/km category from April 2015. Next year, cars with CO2 emissions above 75g/km and less than 130g/km will attract 18pc writing-down allowances.

Companies looking to take advantage of the 100pc tax write-down need to ensure that new company cars have emissions below 96g/km and are registered and invoiced before time runs out at the end of March. The 100pc writing-down allowance means the total invoice value of the car can be offset against corporation tax. After March 2105, the true cost of buying some company cars will increase significantly as only non-hybrid and electric cars will sit below the new 76g/km benchmark.

Drivers can choose a sub 96g/km vehicle that currently still qualifies for the benefit, such as the Volvo V40 D2 115hp manual at 88g/km with accompanying fuel economy of 83.1mpg delivered by its 1.6-litre diesel engine with 285Nm of torque and the lowest vehicle tax band (starting at £0 and subsequent years’ vehicle tax of £0).

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If you compare this to similar models such as the BMW 1 Series Sports Hatch EfficientDynamics or Audi’s A3 1.6 TDi, both with CO2 emissions at 99g/km, their fuel economy is poorer and emissions are higher than the 96g/km CO2 threshold, excluding them from eligibility for a 100pc annual tax write down – so receiving only 18%.

The V40 has proved extremely popular since its launch in 2012 with company car drivers. With the specification business drivers’ demand, V40 also incorporates innovative safety technologies as standard and has been named the safest car ever tested by Euro NCAP.

For more information on how you can benefit on your company car before the tax change, or to arrange a test drive, telephone sales manager Adam Noble at M R King and Sons Volvo in Quay Street Halesworth on 01986 874464.