• company car tax increase employee car ownership

Company Car Tax Take Goes Up As Number Of Drivers Falls

The Government is raising record revenues from the company car market by imposing higher taxes on drivers – at the same time as the number of drivers actually falls.

Provisional figures from HMRC for 2016/17, the latest year available, show that the amount the Treasury collected in company car tax and National Insurance Contributions (NICs) increased by more than 24% year-on-year – up by £360 million. Yet the number of employees with a company car fell by 20,000 over the same period.

The figures indicate that individual drivers are paying record levels of tax due to increases in Benefit-in-Kind (BIK) tax rates, while their employers contribute the highest ever levels of NICs as a result.

How many drivers are involved?

There were 940,000 employees paying BIK tax on a company car in 2016/17 – a 2% fall on the 960,000 recorded the previous financial year. They paid a total of 1.85bn in company car tax.

At the same time, the amount of NICs paid by employers on company cars increased by 5% from £600m in 2015/16 to £630m in 2016/17.

Together, BIK tax and NICs were worth £2.48 billion to the Treasury, compared to £2.09bn in 2015/16 – an increase of 19% or £390m.

Compare that to three years previously in 2012/13, when BIK and NICs were worth £1.75bn to the Treasury – some £730m less – but when the number of employees with a company car was exactly the same at 940,000.

What was the tax take per company car?

The average annual tax yield on a company car in 2016/17 was £2,638 – compared to £2,166 in 2015/16, an increase of 22% in just 12 months.

At the start of the decade (2009/10), a company car was worth just £1,680 in BIK and NICs revenues to the Treasury, giving a total of £1.63bn in total or £850m less than the latest figures.

Why are taxes higher?

Two main reasons. A 2% increase in BIK rates between 2015/16 and 2016/17, which has accounted for most of the increase and, as a result, has contributed to a rise in the taxable value of the company car benefit, up from £4.32bn in 2015/16 to £4.57bn in 2016/17.

And even the fact that company car drivers are generally choosing cars with lower CO2 values has failed to stem the increase in tax revenues.

In 2015/16, the last year for which emissions figures are available from HMRC, 83% of company cars emitted 134g/km of CO2 or less, up from 77% of cars in 2014-15.

And 13 years ago in 2002-03, 58% of company cars had emission values in excess of 165g/km; in 2015-16 this had reduced to just 3%.

What does the future hold?

The Government has already signalled its intentions to add further to the tax burden on company cars.

In 2017/18, company car tax again went up by 2%, while in the current 2018/19 tax year it rises a further 2% and by 3% in 2019/20.

At the same time, the current 3% surcharge for all diesel cars increases to 4% from 2018/19 for diesel cars not certified to the Real Driving Emissions 2 (RDE2) standard – in reality most of them.

However, another potential tax-inflationary factor is the introduction of the new World Harmonized Light vehicle Test Procedure (WLTP) emissions regime.

All new type-approved cars have been subject to the test since last September, while all newly registered cars must be re-homologated by this coming September, under the new regime.

The WLTP replaces the old NEDC (New European Driving Cycle) test which was deemed unrepresentative of real-world fuel consumption and emissions of CO2 and NOx.

However, early tests are suggesting that figures derived from the more demanding, real world tests produce CO2 emissions of up to 30% more than under the previous regime.

The new figures will not apply to first-year vehicle excise duty nor to BIK rates until April 2020, while the Government has announced it will reveal how it intends to help fleet operators mitigate the expected increase in this November’s Budget Statement.

However, as an interim measure, for vehicles that have already undergone the new test, a new ‘NEDC-correlated‘ value for tax purposes has been arrived at, which is typically 10% higher than previously, putting some vehicles into higher tax bands and further increasing the tax burden on their drivers.

What’s the alternative to rising taxes?

Once taxes reach a tipping point, it would not be unusual for employees to begin asking their employers for other means of remuneration instead of a company car.

The falling numbers of drivers in the HMRC figures already suggests this process is taking place with cash-for-car allowances likely to be one option – although the Government has already signposted that it intends to tax the allowance at the higher of the BIK rate or the relevant rate of income tax.

Another option may be the introduction of employee car ownership schemes (ECOs) where the employee, rather than the employer, is the owner of the vehicle.

This switch in focus from the company to the driver means two further differences: the car is the driver’s choice; and, because the employee owns it, there is no BIK company car tax liability.

An ECO scheme is fundamentally different to offering employees a cash allowance instead of a company car as it places control around how the allowance is spent and supports the employer’s duty of care.

This differentiates ECO scheme drivers from the ‘grey fleet’ of employees who use their private car for business – which is another consequence of rising BIK tax rates, but which can cause other issues, not least environmental concerns around running typically older cars.

ECO schemes have become less attractive recently because of the growth of salary sacrifice car schemes. But is the wheel about to turn full circle again following Government moves to make salary sacrifice schemes less attractive to employees and employers?

Only time will tell on that one. But one thing is abundantly clear – the Government risks killing the goose that lays the golden eggs by taxing company cars too harshly, as falling numbers of company cars drivers will ultimately and inevitably mean falling tax revenues.

If you need any further information on the tax implications of operating company cars and the schemes available, please don’t hesitate to get in touch.

2020-04-19T07:43:17+00:00July 27th, 2018|Categories: Cars, Employee Car Ownership, Vehicle Finance|

36 Comments

  1. 파워볼게임 October 25, 2021 at 5:48 am - Reply

    The bill was shot down in a ten-four vote in the Legislature’s House State
    Affairs Committee.

  2. 파워볼 분석기 October 22, 2021 at 11:59 am - Reply

    These are lottery games that give you a second likelihood by winning a lesser prize if four of your
    numbers match, or even if three of your numbers match.

  3. Malorie October 17, 2021 at 6:54 pm - Reply

    I all the time used to read piece of writing in news papers but
    now as I am a user of internet so from now I am using net for articles or reviews, thanks to web.

  4. Proctologista que atende Sulamerica October 17, 2021 at 5:31 pm - Reply

    Eu estou indo dizer para minhas irmãs que visitem seu site regularmente para ficarem atualizados
    com as noticias mais novas!

  5. Alisa October 17, 2021 at 5:16 pm - Reply

    Aw, this was a very good post. Spending some time and actual effort to make a good
    article… but what can I say… I procrastinate a lot and never seem to get nearly anything done.

  6. Grover October 17, 2021 at 4:45 pm - Reply

    Asking questions are actually good thing if you are
    not understanding something entirely, except this paragraph
    gives pleasant understanding even.

  7. Kristopher October 17, 2021 at 3:08 pm - Reply

    Pretty nice post. I simply stumbled upon your weblog and
    wished to mention that I have really loved browsing your
    weblog posts. In any case I will be subscribing for your feed and I
    am hoping you write once more very soon!

  8. Eusebia October 17, 2021 at 11:27 am - Reply

    This blog was… how do you say it? Relevant!! Finally I have found something that helped me.
    Thanks!

  9. Chau October 17, 2021 at 11:24 am - Reply

    This post provides clear idea designed for the new visitors of blogging, that actually how to do
    blogging and site-building.

  10. Katrin October 17, 2021 at 10:35 am - Reply

    It’s a shame you don’t have a donate button! I’d definitely donate to this brilliant blog!
    I guess for now i’ll settle for bookmarking and adding your RSS feed
    to my Google account. I look forward to new updates and will share
    this website with my Facebook group. Talk soon!

  11. Denese October 17, 2021 at 8:51 am - Reply

    Very good information. Lucky me I recently found your blog by accident (stumbleupon).

    I’ve book marked it for later!

  12. Carlton October 17, 2021 at 7:12 am - Reply

    You actually make it seem so easy with your presentation but
    I find this topic to be really something that I
    think I would never understand. It seems too complicated and
    extremely broad for me. I am looking forward for your next post, I will try to get the hang of it!

  13. Leandro October 17, 2021 at 5:39 am - Reply

    Hey are using WordPress for your blog platform? I’m new to the blog world but I’m
    trying to get started and set up my own. Do you require
    any html coding expertise to make your own blog? Any help would be greatly appreciated!

  14. Beverly October 17, 2021 at 5:24 am - Reply

    I every time emailed this website post page to all my contacts,
    for the reason that if like to read it after that my friends will too.

  15. buy soma online October 17, 2021 at 2:52 am - Reply

    Have you ever considered about adding a little
    bit more than just your articles? I mean, what you
    say is valuable and all. But think of if you added some great visuals or video clips to give your posts more,
    “pop”! Your content is excellent but with pics and video clips, this blog could
    certainly be one of the greatest in its niche. Very good blog!

  16. buy soma online without prescription October 17, 2021 at 2:48 am - Reply

    Great article, just what I was looking for.

  17. Betsey October 17, 2021 at 1:37 am - Reply

    Very good article. I’m facing many of these issues
    as well..

  18. Steven October 17, 2021 at 1:16 am - Reply

    This is a topic that’s close to my heart… Many thanks!
    Exactly where are your contact details though?

  19. Pasquale October 17, 2021 at 12:43 am - Reply

    I enjoy what you guys tend to be up too. This type of clever
    work and coverage! Keep up the superb works guys I’ve included you guys to
    our blogroll.

  20. Porter October 17, 2021 at 12:11 am - Reply

    Currently it looks like Drupal is the preferred blogging
    platform available right now. (from what I’ve read) Is that what you are using on your blog?

  21. Aleida October 16, 2021 at 10:59 pm - Reply

    After I originally left a comment I appear to have
    clicked on the -Notify me when new comments are added- checkbox and now each time a comment
    is added I get four emails with the same comment. Is there a way you
    can remove me from that service? Thank you!

  22. Gertie October 16, 2021 at 10:55 pm - Reply

    Whats up are using WordPress for your site platform?
    I’m new to the blog world but I’m trying to get started and set up my own. Do you require any coding expertise to make your own blog?

    Any help would be really appreciated!

  23. Ronda October 16, 2021 at 9:32 pm - Reply

    It’s going to be finish of mine day, however before end
    I am reading this fantastic article to improve my know-how.

  24. Elizbeth October 16, 2021 at 8:59 pm - Reply

    Thanks for one’s marvelous posting! I actually enjoyed reading it, you may be a great author.
    I will make sure to bookmark your blog and will come back from now on. I want to encourage
    you to definitely continue your great work, have
    a nice weekend!

  25. Dani October 16, 2021 at 7:45 pm - Reply

    Ahaa, its good conversation regarding this piece of writing at this place at this weblog, I have read all
    that, so now me also commenting here.

  26. Curtis October 16, 2021 at 6:36 pm - Reply

    Useful info. Fortunate me I found your website accidentally,
    and I’m stunned why this coincidence did not took place earlier!

    I bookmarked it.

  27. Herman October 16, 2021 at 4:30 pm - Reply

    Hey I know this is off topic but I was wondering if you knew of any widgets I could add
    to my blog that automatically tweet my newest twitter updates.
    I’ve been looking for a plug-in like this for quite some time and was hoping maybe you would have some
    experience with something like this. Please let me know if you run into
    anything. I truly enjoy reading your blog and I look forward to your new
    updates.

  28. Christin October 16, 2021 at 3:14 pm - Reply

    you’re really a just right webmaster. The web site loading speed is amazing.
    It sort of feels that you are doing any unique trick.
    Also, The contents are masterpiece. you have performed a magnificent process on this subject!

  29. Coy October 16, 2021 at 2:19 pm - Reply

    I like it whenever people come together and share ideas.

    Great site, continue the good work!

  30. Florentina October 16, 2021 at 12:36 pm - Reply

    I read this article completely concerning the difference of most
    up-to-date and preceding technologies, it’s amazing article.

  31. Katrice October 16, 2021 at 12:29 pm - Reply

    Having read this I believed it was rather informative.

    I appreciate you spending some time and energy to put this
    information together. I once again find myself personally spending way too
    much time both reading and commenting. But so what,
    it was still worth it!

  32. Teddy October 16, 2021 at 5:23 am - Reply

    I am sure this post has touched all the internet visitors, its really really fastidious post on building
    up new webpage.

  33. Cleveland October 16, 2021 at 4:02 am - Reply

    Thanks for another fantastic article. The place else could anybody get that kind of info in such a perfect way of
    writing? I’ve a presentation next week, and I’m on the look for such information.

  34. Iesha October 16, 2021 at 3:05 am - Reply

    I needed to thank you for this fantastic read!! I absolutely enjoyed
    every bit of it. I have you book-marked to look at new stuff you
    post…

  35. Elane October 6, 2021 at 12:49 pm - Reply

    I don’t even know how I ended up here, but I thought this post was good.

    I don’t know who you are but definitely you are going to a famous blogger if
    you aren’t already 😉 Cheers!

  36. Clara July 2, 2020 at 12:11 pm - Reply

    Good Post! Keep sharing.

Leave A Comment