Company Car Tax Implication

[British Patriot]

Well folks this normally gets peoples blood boiling!!.
We have just off leased our peugeot 2ltr 407sw company cars after 3 years (350 per month + vat), we could not really see the tax savings in this, so we have now bought a 2 year old mitsibushi 2.5 shogun sport equippe, the repayment is 318 inclusive of v.a.t per month over 3 years through hp, so it is not ours till the last payment!!, is this cheaper in terms of tax as older car prices have fallen through the floor? also we get to keep it as an assett at the end? I am uder the impression that assets depreciate over time? I`m sure there are other people out there asking the same question.
we are a limited company.
very kind regards gordon broon

[cranleys]

Hi,

Unfortunatately it is not as simple as you would see.

To work out the tax, company car tax has been based not on mileage but on your car’s carbon dioxide emissions. The higher the car’s emissions, the higher its tax liability .

The rates are available on a table but you may be able to ask your dealer if not on the manual or invoice. They are stated in grams per kilometre (g/km) – I use for my clients whatcar.com or at the official website www.vcacarfueldata.org.uk.

Use the carbon dioxide look-up table to see what tax liability percentage this equates to (see table). Petrol cars are straightforward but, if you have a diesel, you’ll need to know whether it complies with Euro III or the new Euro IV emissions regulations – the latter don’t have to pay the 3% diesel surcharge if registered before December 2005.


Those green cars using non-oil based will be better off, have lower tax liability than respective petrol cars. For electric cars, deduct 6%. Petrol-electric hybrids incur 2% less tax, plus an extra 1% for every 20g/km of carbon dioxide emissions below 140g/km. LPG and CNG bi-fuel cars offer a 1% saving with a further 1% for every 20g/km of carbon dioxide emissions below 140g/km.

Work out your car’s P11D price which is the list price plus all options loaded at the time it was purchased, usually this is ignored on the second hand value you are buying in at.
Them multiply your tax liability percentage by the car’s P11D price.

Then multiply this by your rate of income tax, I would love to meet those at 45% or 50% but I guess most will be hitting the marginal rate of 40% if having a company car.

Then you have the tax amount due.....

We generally discourange this use but there are times it can be effective.

Regards.

Colin Davison
Cranleys Chartered Accountants
01256 830000 or 07766 714000.