How to Reduce Company Car Tax

There may be occasions when the expense of your company car tax exceeds your budget. It's all well and good to get a fantastic deal on a car, but is it really worth it if it costs you a fortune in business car tax?

Because company automobile tax is so costly, we have even urged customers to lease privately rather than through their firm.

But, there are ways to avoid paying so much in company car tax. In this article, we'll look at corporate car tax exemptions and ways to lower your company car tax.

• Exemptions from company automobile taxes
• Business car tax does not apply to all company vehicles; exemptions exist.
• You are free from company car tax if you meet the following criteria:
• You are a Partnership Partner.
• A Limited Liability Partnership's partner (LLP)
• You are the owner of your own company.
• Your company car has been modified for mobility purposes.

Your vehicle is not used for personal purposes.

If you just use your company automobile for work purposes, you do not have to pay corporate car tax. This typically entails leaving the automobile on the business property overnight and on weekends and just using it to commute to meetings, meet clients, and so on. Regrettably, the HMRC considers commuting to be personal usage.

If your car is a 'pool' car, you also do not have to pay business car tax. This means that employees use it for business purposes, such as travelling to meetings or training days. This is likewise stored on firm premises until it is required. In this case, all you need to do is inform HMRC that it is a 'pool' car. But, you cannot drive it home or utilise it for personal purposes.

Is company automobile tax deductible for vans?

The laws for vans are nearly identical to those for cars. There are, however, a few more exceptions.

If you solely use your van for work trips or as a pool vehicle, you are exempt. This is where it varies from automobiles. A business trip consists of the following elements:

• Getting to appointments
• to a temporary location of employment
• Also, 'insignificant' private journeys are exempt. This means that minor detours to 'pick up a newspaper on the way to work' or to fetch coffee are immune from business car tax. See our post on company car tax for vans for more information.

Are electric vehicles free from corporate car tax?

No, however you will pay a very small fee. Of course, till April 2017. Cars emitting less than 99g/km of CO2 are currently subject to a 7% BIK rate (as of December 2016). However, it was revealed in the Autumn Statement that further BIK rate bandings will be created, with the majority of them applying to low emission vehicles.

Electric vehicles will be subject to a 9% corporate car tax beginning in April 2017.

Nonetheless, they will be immune from the salary sacrifice modifications. These changes will affect how salary sacrifice plans are taxed. Instead of receiving the current tax breaks, salary sacrifice plans will be taxed as if they were cash equivalents. The only exception is if your vehicle is ultra-low emission (ULEV). A zero-emission vehicle (ULEV) emits 75g/km of CO2 or less. They will be taxed at the existing BIK rates. 

How can I have my company car tax reduced?

If you are not eligible for an exemption, you may be asking how to lower corporate car tax.

One of the simplest methods to lower your company car tax is to purchase a low-emission vehicle now, before the auto tax changes take effect. So what else can you do if it isn't an option?

The following factors are used to compute company car tax:

• How much CO2 does your vehicle emit?
• The vehicle's P11d value
• Your tax rate
• One of those factors is beyond your control, but the other two are. To lower your company car tax, you should choose a vehicle with a low P11d value and low CO2 emissions.

What exactly is the P11d value?

A car's P11d value is:

• The stated price of the manufacturer, including factory options
• VAT
• Delivery
• Number plates, as well as any additional pricing alternatives
• As a result, if your automobile has a high P11d value, you will have to pay higher corporate car tax.

How can I lower my P11d value?

There are ways to minimise the P11d value, and one of them is to just buy a cheaper car. If you don't want to compromise on the model, limiting the number of extras will lower the P11d value. Yet, if you are serious about saving money on company car tax, the lower the P11d value, the better.

Some vehicles with low P11d levels that might make excellent corporate vehicles include:

• The Smart Fortwo
• Saloon Toyota Avensis
• Sandero Hatchback by Dacia
• Ibiza Sport Coupe by SEAT
• Estate Skoda Fabia
• 500C Convertible Fiat
• The Nissan Juke

The amount of CO2 your automobile releases is the second factor in calculating how much company car tax you pay. This is the most important aspect in calculating your company automobile tax. The primary strategy to reduce your company car tax is to purchase a low-emission vehicle.

As previously stated, changes to company car tax mean that you will no longer be able to have a completely exempt corporate car starting next year, but you can still save a lot of money on company car tax if you get a low-emission vehicle.

If you want to save money on corporate car taxes, consider purchasing an electric vehicle. They have zero emissions and will be taxed at a rate of 2%. Nevertheless, this is not a practical option for everyone, thus cars emitting between 1g/km and 50g/km are the next best thing. The tax on these vehicles will range between 2% and 14%, depending on how many zero-emission miles they can drive.

Investing in a low-emission vehicle is another excellent strategy to decrease your company car tax. One of the reasons for these company car tax modifications is that low-emission automobiles are becoming increasingly common, so finding a low-emission vehicle is no longer as difficult as it once was. From city cars to executive saloons to vans, there is a low-emission vehicle for everyone. Here are a few vehicles you might be interested in.

• The Nissan Leaf
• The Toyota Prius
• e-Golf by Volkswagen
• 330e BMW 3 Series Saloon
• E-Hybrid Porsche Panamera
• Mercedes-Benz E-Class 350e Plug-In Hybrid
• e-NV200 Combination
• Van Z.E. Kangoo

In an ideal world, you would find a vehicle with the lowest P11d and CO2 emissions. At the time of writing, there are relatively few automobiles that emit less than 75 CO2 and cost less than £30,000 to purchase. Currently, the ideal SUV combination would be a Dacia Sandero Stepway 1.5 dCi, a Peugeot 2008 1. BlueHDi Access, or a Renault Captur 1.5dci.

Nevertheless, because this is always changing, we recommend utilising the search tool to discover what is currently accessible. If you are open-minded, choose less than 99C CO2 and body style and see what possibilities you have.

Hopefully, this has given you some ideas on how to lower your company car tax. These vehicles are correct at the time of writing, and if you are unsure, you can utilise our website's search option.