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Low Emission Cars
Green is Good
We all remember that the 1980's mantra was 'greed is good'. Now it is green rather than greed that is in fashion. At WVL we have always taken a balanced view - of course the environment is important, but so is your bottom line. If going green is going to cost you money, then that is a powerful argument for leaving things as they are.
Well, we think that the balance has now shifted in favour of low emission vehicles. Not because we have been sitting in front of nature documentaries about the state of the Arctic ice floes, but because changes in tax and legislation have now made it an economic as well as a moral decision to clean up your act. And for a change, that means that switching to more efficient vehicles can actually save you money as the government is offering incentives as well as penalties.
See a list of low emission cars (as of April 2008).
There are five major areas in which you and your staff can benefit from the use of low emission vehicles:
Vehicle Excise Duty, Capital Allowances, Benefit-In-Kind Tax, Congestion Charges, Private Mileage.
Let's have a quick look at each of these.
Vehicle Excise Duty
Incentives for low emission cars including £0 road tax for the cleanest vehicles. From 2010, extra penalties for high polluting vehicles: road tax of up to £1000 per year. A potential difference of £1000 per year per vehicle.
To see a table showing Current and New VED rates, click HERE.
Capital Allowances
From April 2009:-
Expenditure on cars with CO2 emissions above 160g/km attract a writing down allowance (WDA) of 10%
Expenditure on cars with CO2 emissions of 160g/km or less attract a writing down allowance (WDA) of 20%
For leased cars:-
Cars emitting more than 160g/km will have 15% of the relevant payments disallowed.
Cars at or below 160g/km will have no disallowance.
In summary, this means that vehicles that produce emissions at or below 160g/km become much more tax efficient as a larger proportion of their value can be offset against tax much more quickly. As well as this, the 100% first year allowance is going to be extended from 31st March 2008 to 31st March 2013 and the qualifying CO2 emissions limit will be reduced to 110g/km.
Benefit-In-Kind Tax
Benefit-in-kind tax for company cars is based on CO2 emissions. Drivers pay tax at their higher rate (20% or 40% from 2008/2009) on a percentage of the value of the car based on a table of emission figures. The more you pollute - the more you pay.
A new tax band has been introduced for vehicles producing 120g/km CO2 (with a 3% supplement for diesels). This may be reduced to 110g/km in future budgets. The improvements in emissions technology mean that larger cars (including hybrids) can now hit these levels - and advances are being made all the time. The days of having to drive a small sit-up-and-beg car to ensure you are green are well and truly over. Have a look at our summary of presently available low emission models HERE to see - you will see that you could drive an Audi or a BMW and still hit those targets.
And remember that employers pay Class 1 A National Insurance Contributions on such benefits. So as an employer if you provide low emission vehicles for your workforce not only will their tax bills be reduced, but you benefit too. In fact you could slash your NIC contribution costs by thousands of pounds a year.
To see a table showing Benefit-In-Kind tax rates, click HERE.
Congestion Charges
From October this year, there will be a 100% discount on the London congestion charge on cars that emit 120g/km or less. Remember, the congestion charge is £7-£10 per day, per vehicle and that's without any of the penalties that will apply if you don't pay within a day of incurring the charge. And those start at £120. Use a low emission vehicle and you can eliminate the cost and the worry.
Private Mileage
In the 2008/2009 tax year, company car drivers who are given free fuel for private mileage will pay tax on a value of £16,900. They will pay (20% or 40%) tax on a percentage of that amount. The percentage depends upon the CO2 emissions of the car.
In fact the advice of most experts is that as the taxable amount has reached such a level that it is the equivalent of having a reasonably specified second company car, having free fuel for private mileage is not now tax efficient, and it should be avoided. Instead reimburse for business-use fuel at the Approved Mileage Rates, unless the employee is at the very top level of private mileage use.
See a list of low emission cars (as of April 2008).
If you want to find out more on anything you see here, just get in touch - we’ll be pleased to hear from you. Visit our main WVL website or
Call 0845 125 6351
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