For many, a new company car is a necessity – something essential to being able to perform a job. Sadly, to the HMRC, it’s considered a perk, and perks, just like wages, are taxable. The Benefit In Kind (BIK) tax is really affecting choices in 2017, as the sums are dependent on CO2 emissions and a chosen vehicle’s P11D value (the initial price of the vehicle, including all the added options), and that affects the value of everything whether you were looking for an electric, petrol or diesel vehicle.
How Does It Figure?
Up till now, electric cars had a zero rate, but with the herald of the new tax year, the benefits were changed and these zero emission cars are now part of the seven per cent band. This ‘lucky seven’ includes the super-green cars that have a CO2 emission rate of 50g/km or less. Any vehicle that pumps out more can expect to pay 37% BIK.
The other component we need to look at when we’re discussing the money side of business leasing is the salary bracket you fall into. Simply put, if you fall into the 20% salary bracket, you’ll pay 20% of the P11D value. If you’re fortunate enough to fall into the 40% salary bracket, then you’re going to end up paying 40% of the P11D value, which is usually taken out of your pay on a monthly basis.
In Diesel Really A Dirty Word?
There has been plenty of anti-diesel sentiment swirling around, with the new tax year bringing in an extra tax hike for diesel drivers in urban areas. However, don’t let the headlines inform your new company car or fleet judgement. Instead, look at the facts provided by The Society of Motor Manufacturers (SMMT) who come to diesel’s defence.
The SMMT says diesel is critical in reducing CO2 emissions, which in turn is tackling climate change. Their figures suggest that diesel cars emit, on average, 20% lower CO2 than petrol equivalents, with diesel cars saving 3.5 million tonnes of CO2 from going into the atmosphere since 2002.
The SMMT goes on to highlight that the latest Euro 6 vehicles are the cleanest in history. On top of progressive particulate filters, many models also feature advanced clean up technology such as the SCR (Selective Catalytic Reduction) system, via the use of Adblue. This converts most of the NOx (Nitrogen Oxide) from the engine into harmless nitrogen and water before it reaches the exhaust. It works too, as they go on to quote real world tests using new buses on a chosen London route, which have showed a 95% percent reduction compared to previous Euro 5 versions.
So, What’s The Answer?
Unfortunately, there are no clear answers. However, executives and fleets searching for a new company car should consider this: diesel remains very thermally efficient – which means it goes a long way on a gallon of fuel. And for high mileage drivers, with many journeys performed on the motorways, the air quality issues that affect diesels in urban centres simply do not apply.
Do your homework, if part of your fleet spends more time in urban environments, then maybe you should consider alternatives. This means taking a more analytical view of the fleet: which drivers need diesels for high mileage driving? Which drivers spend time in urban environments?
Get The Right New Company Car
If you run vehicles in your business, then FCS Vehicle Solutions can help you understand the impacts on your budget, including BIK and the engine choice for your new company car, call our dedicated team on 01273 020588. FCS Vehicle Solutions is a trading style for Fuel Card Services Ltd. We have a network of more than 3,000 UK dealerships across 30 plus manufacturers and access to the most competitive deals for both cars and light vans (up to 3.5 tonnes) available. We are authorised and regulated by the Financial Conduct Authority.
Our unique position as a leading vehicle broker, allows us to obtain large discounts on most makes and models of new cars. We have access to substantial discounts that can easily beat the offers on the high street. You can see thousands of examples of our current deals on our website or subscribe to our newsletter, and have exclusive deals sent direct to your email.