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Go Green Or Go Under

Sunglasses? Check. Latest stereo sound system installed? Check. Lowest carbon emitting car on the road? Erm…

Car owners across England have had a mouthful from the government about buying the most fuel-efficient vehicle with TV ads hammering home the newest hybrid available for purchase and flashy red electric cars whizzing across TV screens. So the time has come for a crackdown on company car drivers.

Our ‘hybrid’ government have backed Labour’s previous plans to massively increase company car tax. So if you are not willing to switch over to a more fuel-effective engine this means ditching those holiday plans for Europe and taking a trek down to the countryside instead on the long bank holiday weekends.

There is no escaping it – even for business car leasing customers; for company motorists looking to save their hard-earned pennies a switchover to low-emitting cars is the only option. As a company car driver you know if you purchase or – if you prefer business car leasing as an alternative to outright purchase – lease a car through your employer, you will have to pay tax on the value of the benefit, the value dependent on the car’s carbon dioxide emissions, among other things.

To put it in context, James Abbott of contractor accountant Baker Watkin suggested that if you purchase a mid-range saloon, say if you buy or take out a new business car leasing contract on a Volkswagen Passat Saloon, with a list price of £20,000 and CO2 emissions of 150g per km, the benefit-in-kind offered by your employer will average out to around 20% of the listing price. Abbot explains, “if you buy this through your company, it’s going to put extra income on your personal tax return of £4,000, which for a higher rate taxpayer means an extra £1,600 in income tax.” But hold on, don’t throw your pens across the room or rip up your papers in frustration and curse the government quite yet, if you purchase (or take out a new business car leasing contract on) a ‘green’ car with low CO2 emissions no higher than 120g per km then the benefit-in-kind will swing in your favour and be averaged at only 10% of the list price, meaning for that £20,000 Volkswagen Passat you’ll be charged £800 for tax and around £256 for National Insurance for the company.

To put it simply, the massive increase in company car tax will be heavily placed on vehicles emitting 120g CO2 upwards. The Conservative/Liberal Democrat government have kept green issues high on their hit-list for the future and have decided cars exceeding 120 grams per kilometer are damaging the environment and must be labeled as high CO2 emitting vehicles and consequently must be heavily taxed – even if they are on business car leasing contracts.

To be exact overall impact for petrol cars has been confirmed as 50% after the CO2 percentage will jump from 10 to 15% beginning this year with the plan’s full completion set for April 2012. Though there are not many cars or business car leasing deals at the moment with CO2 emissions below 120g/km, the numbers will rise as companies will also benefit from leasing and selling lower emitting vehicles, so keep your optimistic and opportunity caps on.

For contractors, cars with a 160g/km rating or less are 100% permissible while cars beyond that figure come hand-in-hand with a 15% penalty. Your employer will be paying less tax by persuading you to buy or lease a low emitting car so it’s a win-win situation for all. Think about it, the company car tax is halved for ultra-low carbon cars and for cars emitting below 75g/km there is now a 50% discount on company car tax. There is of course the slight set-back of how many cars even emit less than 75g/km however electric hybrids will be arriving in the upcoming years and it is a massive pointer that the government will be favouring and rewarding drivers that opt for lower emitting company cars.

Your company – already sold on the idea of business car leasing – will definitely find it more tax-efficient to lease ‘green’ cars. Some car firms have already begun releasing brand new smart models for companies to buy or have come up with tax-busting business car leasing deals on them. So before you shrug off these tax changes with an indignant sneer, do consider the benefits and money that could be saved. The tax changes have been solidly put in place and will proceed. So for all you stubborn company car drivers not willing to switch over to the green low-emission side, just remember it may be a case of go green of go under financially. Plus your boss or your business car leasing fleet manager might just start slipping salt in your coffee and pinching staples from your desk if you don’t swap to the green side.

A business car leasing article by Heather Greenwood