Company car or company van?

Company car or company van?

Company car or company van? It’s something we get asked a lot about here at Modina.

Here’s our run down on the advantages and disadvantages of either choice.

When is a company tax taxed?

You’ll get taxed on your company car if you drive it, even very infrequently, for a personal use. That includes commuting – driving from home to your place of work or to a client’s premises on an appointment, for example.

For the HMRC not to tax you on commuting, you’d have to leave your car at the business premises each night and only use it for business purposes.

What about a car that’s shared?

Shared cars, those cars used by two or more of the employees (including yourself as the director) within a business, are not taxed as a company car. The typical types of use that a shared car may be put to are travelling to customer appointments or out on service calls. More than one employee must have regular access and usage of the shared car.

Again, the shared car will need to be kept on the company premises when not in use.

How are company cars taxed?

The most important factor determining the level of taxation on a company car is its CO2 emissions. The lower the amount of CO2 produced, the lower your company car tax.

Let’s look at example of how it works with a Vauxhall Insignia Grand Sport New 1.5 (140PS) Design Nav Turbo ecoTEC.

The P11d value of this car is £17,725. In financial year 2017/2018, the percentage charge based upon its CO2 emissions is 25% (something called its BiK rate). This produces a benefit in kind of £4,431.

A basic rate taxpayer would pay £886 tax on their new Insignia during the year. A higher rate taxpayer would need to find an additional £1,773 in tax.

The BiK rates have been published for the next three years and here they are  –

 

Vehicle CO2
g/km
2017-18 2018-19 2019-20
Petrol Diesel Petrol Diesel Petrol Diesel
1-50 9% 13% 16%
51-75 13% 16% 19%
76-94 17% 20% 19% 22% 22% 25%
95-99 18% 21% 20% 23% 23% 26%
100-104 19% 22% 21% 24% 24% 27%
105-109 20% 23% 22% 25% 25% 28%
110-114 21% 24% 23% 26% 26% 29%
115-119 22% 25% 24% 27% 27% 30%
120-124 23% 26% 25% 28% 28% 31%
125-129 24% 27% 26% 29% 29% 32%
130-134 25% 28% 27% 30% 30% 33%
135-139 26v 29% 28% 31% 31% 34%
140-144 27% 30% 29% 32% 32% 35%
145-149 28% 31% 30% 33% 33% 36%
150-154 29% 32% 31% 34% 34% 37%
155-159 30% 33% 32% 35% 35% 37%
160-164 31% 34% 33% 36% 36% 37%
165-169 32% 35% 34% 37% 37% 37%
170-174 33% 36% 35% 37% 37% 37%
175-179 34% 37% 36% 37% 37% 37%
180-184 35% 37% 37% 37% 37% 37%
185-189 36% 37% 37% 37% 37% 37%
190-194 37% 37% 37% 37% 37% 37%
195-199 37% 37% 37% 37% 37% 37%
200-204 37% 37% 37% 37% 37% 37%
205-209 37% 37% 37% 37% 37% 37%
210-214 37v 37% 37% 37% 37% 37%
215-219 37% 37% 37% 37% 37% 37%
220-224 37% 37% 37% 37% 37% 37%
225-229 37% 37% 37% 37% 37% 37%
230 or above 37% 37% 37% 37% 37% 37%

Would I be better off having a car via salary sacrifice?

If you’ve never operated a salary sacrifice scheme in your company before, nor did you benefit from one in previous employment, this is what they are.

It’s an agreement between you and a staff member (that can be you if you’re a director) which reduces the amount of cash your employee receives in exchange for a benefit. Salary sacrifices are used for things like childcare vouchers and pension contributions.

When it comes to company cars, your employee will pay tax on whichever is the greater – the BiK rate or how much you’d pay if the employee was given the cash instead. The only exemption to this is for ultra-low emission vehicles (those that produce less than 75g/km of CO2 of less) which will be taxed on their BiK rate.

Other than for these types of cars, salary sacrifice is not really an attractive option for employers or employees any more.

How is a company van taxed?

You don’t have to pay company car tax if you use your van to travel somewhere for a business reason or to a temporary workplace. If it’s stored at an employee’s home (including a director’s home) overnight regularly, you will pay tax on it.

Shared vans don’t attract taxation, just like shared cars. For it to be classified as a shared van, more than 1 employee must regularly use the van so they can do their jobs and it must only be used at other times for business-related journeys.

What can be classed as a van?

Any vehicle whose primary purpose is to convey goods or burden and whose gross vehicle weight when fully loaded does not go over 3,500kg.

A quirk in the law means that many 4×4 pickups can be classified as vans as long as it has a payload of at least one tonne. You can see the list here of what HMRC classes as a car or a van.

How are company vans taxed?

Cars are taxed on their BiK rate but vans, when used for private journeys, have a standard value of £3,230 on which they’re taxed.

You can reduce the £3,230 value if the employee (or you as a director) can not use the van for 30 days in a row or your employee (or you) pays the company privately to use the van.

If other employees use the van, you can then divide the £3,230 by the number of users.

For fuel, there is a standard value of £610 which can be reduced if your employee (or you as director) cannot use the van for more than 30 days in a row, your employee (or you) pays your company back for private fuel usage, or you stop providing fuel during the tax year.

For zero emission vans, you’ll need to report to HMRC on the P11d at 20% of the £3,230 (£646).

Get Modina’s help with company car tax and company van tax

We can help you with all bookkeeping matters for your company cars and vans. Give us a call if you want to get our input on whether you choose a car, a van, a 4×4, or none of them.

The Modina team is available on 020 7183 8241 or by email at info@modina.co.uk.

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