Changes made to the taxation of company cars to fall in inline with the Government’s green agenda mean that the once great perk of motoring at the cost of the employer is no longer the benefit it once was. To be given a company car is now the exception not the norm.
If we take, for example, the typical middle management car, a BMW 3-Series Coupé 325i SE priced at around £30,000, the actual cost to the employee is in the region of £2,500 per year. Assuming a 3 years lease the employee outlay would have been £7,500 but they have nothing to show for it.
The same car could be brought personally via an HP contract for a similar outlay and the employee would own the car at the end of the contract. In return it is generally the case that the employer would also pass on to the employee some of the savings it has made (by not having to acquire the car in the first place) in the form of higher salary. For the average mileage driver and their employer it is a win win.
There are of course always exceptions to the rule.
The small car
Lower emission small hatchbacks/super minis, generally used a second car or for a younger member of the family, still make a good benefit for a director or higher paid employee.
If we take, for example, a typical second car, a Citroën C1 1.0i Splash 3d valued at £9,000, the actual cost to the employee is in the region of £350 per year, far less than it would cost to buy and run the vehicle personally. Again it is possible for both the employee and employer to share in the savings in the form of a small reduction in the employee’s salary.
The classic car
Cars over 15 years old and with a current market value of under £15,000 are taxed under separate rules. For these cars the taxable benefit is based on the list price when new. Many classic cars fall within this category including MGs, Triumphs, Jaguars and even some Ferraris can be purchased now for under £15,000 but would have cost less than £2,000 when new.
At a cost or list price of £2,000 the taxable benefit would be no more than £280 per year.
A supercar for supermini money.