By Mel Hackney
In the past, whenever a client has posed the question “….and how about a company car?” (usually with a hopeful glint in their eye), I have always been pretty quick to quash their dream of a sparkling new Jaguar, paid for by their company, being a brilliant, tax efficient benefit of business ownership.
Up until now.
From 6 April 2020, the taxable benefit of an electric company car is going down to nil. This means that a director (or employee) of a company can use an electric car owned by the business with no personal tax liability arising. In addition, the company will suffer no Class 1A National Insurance on the benefit either. Although this is set to rise very slightly from 2021, compared to previously this is potentially an extremely tax efficient way of remunerating employees or owners.
Not only does the employee have the unrestricted use of a car with no income tax or national insurance arising, the company also gets a corporation tax deduction in the year of purchase. If the car is new, the full cost can be deducted from profit when working out corporation tax. So, for example, if the company buys a car for £40,000, the corporation tax saved in the year of purchase would be £7,600. Currently, this tax saving is only available until April 2021. But it’s possible that this will be extended into future years.
The array of electric cars available, such as the Jaguar I-PACE, is increasing all the time. But if a fully electric car is unavailable, or unsuitable for your needs, the tax rules for ultra-low emissions cars with CO2 emissions of less than 75g/km are still pretty attractive.
So perhaps the time has come to splash out on that new Jaguar. And with the blessing of your accountant too. How times have changed.
If this might be of interest to you, please get in touch – we’d be happy to discuss the options with you.