How a Company Car Affects Your Taxes
If you have a company car, and it’s your first time having one during tax season, then you should know that there are certain aspects about your taxes that will be affected. It’s best to become thoroughly informed about what having a company car means, and one of the first places to start is to find out how it’s going to impact you during tax time.
The main way that owning a company car is going to affect you is that you’re going to have to pay a Company Car Tax each year when you do your income taxes. This tax, also called the Benefit in Kind Tax, is in exchange for having the benefit of driving a vehicle that’s supplied by your employer. Company cars aren’t the only things that apply to a Benefit in Kind Tax; also, car fuel allowances can call for this tax.
The Company Car Tax must be paid if you use your company car for private use at all. This includes driving to and from work. If you drive a company van, however, the law is a little different—driving to and from work is not means for having to pay a Company Car Tax.
The amount that you will be taxed varies depending on a number of factors. The tax is based on the company car’s CO2 emissions (the lower, the better), the car’s P11D value (this is the list price, including extra features and options), whether your car is able to run on alternative fuel, and the rate at which you pay tax on your income.
If you want to figure out how much you need to pay in your Benefit in Kind Tax (whether for future use or because you’re doing your taxes), there are several online calculators that can help you figure out the amount. Most of the time, all you need to know in order to use one of these calculators is the make, model, and version of your company car.
However, if you want to avoid the Company Car Tax altogether, there is a way. If your boss offers you a choice between a company car and a car allowance, go with the allowance and use it to lease or buy your own car. Then you can claim an amount back from your boss for business mileage.
So there you have basic information about how owning a company car will affect your taxes. Do you have any tips or advice for those that have company cars?
About the author:
Katrina Robinson is a freelance writer who covers a wide variety of topics ranging from finances and car insurance to lifestyle and nutrition.