Company car drivers could see the amount of Benefit-in-Kind (BIK) Tax they pay increase from April.
The cause for the increase is due to the threshold of the 40% bracket being lowered, and shall mean those employees who are earning £42,475 will now pay tax at the higher rate of 40%; previously the 40% tax bracket started at £43,875.
The Institute of Fiscal Studies say that the change is likely to affect around 700,000 people and further plans to lower the threshold is due 2014.
These changes which are due in April make having company cars even more expensive, for both the employers and employees, with some employees seeing their BIK Tax rise by more than £1,000.
In addition, the Government are set to increase cars with CO2 emissions of 130g/km to 225g/km and according to HMRC some 110,000 company car drivers are likely to be effected.
The changes are giving directors a dilemma, with the recent changes to Duty of Care becoming even more stringent, by making them more responsible for vehicles being used for their business, whether the vehicles are owned by them or not, so what is the best way forward?
In the past businesses have gone down the route of money-in-lieu of company cars, but this as some have found to their peril, has left them with little or no control over the vehicles being bought and used for their business, and that’s assuming that the money is being used to purchase a vehicle. On the other side, employees have become unhappy and want to go back to having a company car, as the cost of ownership is more than the allowance being given by their employers, particularly as prices have increased along with the VAT increase.
BOSS AUTOMOTIVE HAS THE SOLUTION
Ken Davis – Boss Automotives Chief Executive – said, “I have seen over the past three years a move towards tax effective schemes, they offer a good solution to the increase on NI and BIK Tax, and it allows businesses to keep control of their vehicles, covers the Duty of Care aspect and at the same time saves them around £10,000-£12,000 per car. Now with the changes coming into force in April, the savings are likely to be even greater”
Employees also WIN, as Boss Automotives – Inland Revenue Approved Schemes, employees will have no BIK Tax to pay on their cars. There are other advantages to be had with our schemes, particularly with the changes to accountancy rulings due also to come in April on leasing products (property, capital equipment, vehicles etc) where leases were previously not shown on the balance sheet, will need to be show from this April. Our scheme simply removes the vehicles from the balance sheet providing another advantage and solution to the changes.