If you’re looking to upgrade your company car this new tax year, there are a few important things to bear in mind. You’ll need to make sure you’re looking at the most efficient cars and that you select the right make and model to fit your business needs, but you’ll also need to ensure that the tax advantages aren’t outweighed by a big initial outlay or high running costs (I’m sure you’ll agree, these are all important factors within the small or start-up business world).
Before we take a look at the options that are available to you, let’s quickly look at what exactly company car tax is…
What is company car tax?
Company car tax is payable on a certain percentage of the total value of your car as declared on your P11D form (your end of year benefits and expenses form, which your employer will send to HMRC).
The percentage you pay is based upon the car’s emissions – hence diesels have always been popular due to their lower CO2 emissions and why hybrid and electric cars are growing in popularity. If you earn £32,010 or less each year, you’ll pay 20% of this amount in tax, rising to 40% if you earn anything over that.
If you earn over £150,000 a year, you’ll have to pay 50%. This tax is usually taken directly from your monthly salary.
It’s also worth noting that there is no maximum price cap on the amount taxable on a company car.
The great fuel debate
So, given that the amount you pay in tax is defined by the amount of bad stuff your car spits out, opting for a low-emissions vehicle would appear to be a no-brainer. But it’s not quite that simple.
For instance, while diesel vehicles have always been a staple among company car and fleet buyers, they’re no longer considered to be a more eco-friendly option. Although they still emit far lower CO2 emissions than petrol vehicles, they throw out dangerously high levels of nitrogen dioxide and other lethal particulates.
And while opting for a diesel now might make sense, if proposed changes in legislation come about to help the UK meet EU pollution targets, you could find you’re hit in the pocket further down the line.
Other factors to consider
Then there is the issue that diesels often have a higher windscreen price than petrols, and this is something that becomes even more of an issue if you’re looking at buying a hybrid or an electric car. While you’ll pay less in tax due to the lower emissions, you’ll have to offset this against the upfront cost of the car to work out whether it’s worthwhile.
Furthermore, you’ll also have to check the performance and range of any electric or hybrid vehicles before you commit, as they simply may not be suitable for the type of driving you do.
The good news is there are an increasing number of low-emission petrol vehicles coming on the market – so let’s take a look at some of the best options out there…
The five most efficient company car choices
Ford Mondeo – £20,795 or £204 per month
The Mondeo has long been the number one choice for company car owners and travelling salesmen the country over, and with good reason. This is a big, practical, reliable family-sized car that is surprisingly enjoyable to drive.
Audi A6 Avant – £32,985 or £338 per month
If you’re after an executive model with enough room to carry everything but the kitchen sink around in, look no further than the smooth and sophisticated A6 estate.
Audi A3 – £18,900 or £240 per month
All the refinement of the A6 Avant – minus the load space – and much cheaper to own and run. The A3 offers a great executive alternative to the VW Golf, and is also available as a plug-in hybrid.
Skoda Octavia – £16,310 or £179 per month
If you’re not bothered by the car’s badge then you need look no further than a Skoda – cheaper than both the Volkswagen and Audi alternatives but no less sound under the bonnet.
BMW 3 Series – £23,555 or £287 per month
If you simply must have the badge to match the performance though, the BMW 3 series offers it all and has long been the go-to car for buyers who want a small, executive saloon.
If you’re looking to buy a company vehicle in the new tax year, let us know what your most important considerations are and what you’ve got your eye on in the comments.
This post has been provided by Ed Scott, who is the voice of the webuyanycar.com blog, the UK’s leading car buying service. As shown by his job and his blog. Ed has a strong passion for everything car related!