Wondering how to choose your next company car? Balancing luxury, affordability and tax efficiency can be a tricky business, especially if your employer has imposed strict rules on what you can or can’t have. But don’t worry, here’s our straightforward guide that explains what to look for when choosing your next company car.
How to choose your next company car
A company car can be a great, tax-efficient perk, if you can make the numbers work for you. Here’s our simple guide to finding your perfect company car…
Look for low emissions to keep the cost down
To encourage fleets and business users to opt for greener company cars, the government levies a Benefit in Kind (BIK) tax based on CO2 emissions. The higher the CO2 emissions, the more tax you – and your employer – will have to fork out. Currently, there are 35 BIK bands ranging from 13% (0g/km of CO2) to 37% (more than 180g/km). Cars under the 130g/km threshold tend to be the best value.
Don’t ditch diesel without doing your homework
The UK government is no longer championing diesel engines. In fact, HMRC has added a 4% diesel surcharge to the Benefit in Kind tax, bumping up the cost of opting for a diesel over a petrol equivalent. However, if you rack up enough miles, the fuel savings could outweigh the cost of the extra tax. You’ll need to crunch the numbers to see which will work out better for you.
Electric company cars will be a lot cheaper in 2020
Currently, electric cars attract a 13% BiK tax. In 2019, that will rise to 16%. But in 2020, the government is dropping that to just 2% for zero emissions vehicles. This is designed to incentivise vehicles that drive on battery power alone, so if you’re thinking of getting a Nissan Leaf, it could be worth waiting until 2020 before going electric.
Look for a car that will suit your career and your lifestyle
If you sell wind turbines for a living, you might want to opt for something eco-friendly. That said, you don’t want to have to waste hours queueing for a rapid charger at South Mimms services. Think carefully about the practicality of an electric vehicle or plug-in hybrid, especially if you don’t have off-street parking. Charging it could be more hassle than it’s worth.
Look for exclusive models for company car drivers
Reducing the P11D value doesn’t necessarily mean opting for bargain basement spec. Most brands create models specifically tailored to company car drivers. The Vauxhall Astra ‘Tech’ range, for example, is built for business users, and includes a sat-nav with an 8.0-inch screen, leather steering wheel and a front armrest as standard.
How to calculate company car tax
To calculate your tax liability, multiply the car's P11D value (list price including extras, plus VAT and delivery) by its BIK tax band. Then multiply that figure by your personal income tax bracket (commonly 20% or 40%). Don’t fancy doing the maths? There are plenty of online calculators that will crunch the numbers for you.