• 2012 budget scrapped old tax threshold
  • introduced sliding scale to calculate tax on emissions
  • government announces tax revenue from company cars down £500 million

The BVRLA has released its new Guide to Vehicle Funding: a digital publication which will help business owners to work out exactly which method of vehicle finance will give them most benefit.

This will prove a useful resource as the government looks set to try to recoup considerable lost tax earnings from the car leasing industry.

This will prove handy, as it has been revealed that the government’s tax intake from company cars has fallen by half a billion pounds. Tax revenue has fallen by 20% on 2010/11 figures – from £1.8bn to £1.41bn, and National Insurance Contributions have also fallen from £700m to £560m in the same period.

The BVRLA has obtained HMRC figures under the Freedom of Information act that show the government has made plans to earn around £2bn from company car tax between 2013 and 2017.

This figure looks somewhat optimistic, as the current trends reflect a dip in popularity of car leasing, and company car leasing in particular.

As with private ownership, carbon emission levels are used to calculate the rate of tax on a leased vehicle. The 2012 Budget saw the old tax threshold abolished, in favour of a sliding scale for calculating tax:

  • cars with co2 emissions of between 100-105kg/km pay 11% tax, which increases by 1% for every additional 5kg/km of emissions, to a maximum of 35%
  • company cars with emissions of 99kg/km or less, or between 121-124kg/km are unaffected
  • all other drivers are being hit with BIK (Benefit-in-Kind) tax rises
  • drivers of cars with between 100-120kg/km are being worst hit

Key things to remember when considering which form of finance is best for you are:

  • There are many options available to you: not only to lease or buy, so do your research, shop around at places like Flexxilease, and don’t rush into anything
  • Some vehicles have a higher after-tax cost than others, so think about the implications of certain vehicles and the effect they will have on your business in the future
  • Think about whether you really need to offer a company car – or whether it could be more tax-effective for your business to offer alternative benefits to employees. Company cars are dwindling in popularity, and are not considered as basic a benefit as they once were.