Tax on company cars – how low can you go ?

If you run your business through a limited company, you probably charge the company for business mileage. 

This is tax-free up to 45p per mile.  An additional 5p is allowed for every passenger and the payments are usually the most tax-efficient way of doing things.

Company Car Tax

However, there are exceptions.

If you use a van or run a low-emission car, the best option may be for the vehicle to be held (owned or leased) by your company.  In such circumstances, the company is responsible for all the costs (except private fuel) and you will be taxed on the deemed Benefit-in-Kind (BIK).

For vans, the BIK is a standard charge, depending on whether the van has zero CO2 emissions.

For cars, the BIK is a percentage of the vehicle’s list price when new (irrespective of the price paid by the company for the car).  The percentage is based on the CO2 emissions.

From 6 April 2020, the tax you pay on your company car could be reduced by a massive 87.5%.  If your car’s emissions are 50 g/km or less, the tax you pay on your car will be based on the battery range and, for cars with a range of 130 miles or more, the taxable benefit will be reduced from the current 16% of list price to just 2%.  This could be further reduced to nil if the car is registered on or after 6 April 2020.