Company cars are a widely popular benefit and can often be a selling point for employees. However, when weighing up the pro’s and con’s we come to realise they may be more hassle than they are worth.

Easy target for the taxman

When used for private use, an employee owning a company car will be taxed depending on the cash value. The cash value is made up of the list price and the appropriate percentage.

The list price describes the price of the car at brand new, despite the fact the car may have been bought second hand or that the value will continue to decrease over time.

The appropriate percentage is solely dependent on the car’s CO2 emissions although, adjustments are made in order to reflect periods where the car was unavailable for use.

Reducing your tax cost

There are a number of ways in which you can reduce the amount of tax you pay for a company which are as follows:

• Part-time use: If you have your company car part-time the costs are reduced
• Lower emissions: Choosing a car with lower CO2 emissions will lower the amount of tax you pay
• Employee contribution: If you contribute towards the cost of the car the amount of tax is reduced

Change in company car taxation

The downside to owning a company car is that the Government continue to slightly increase the tax charge each year. Therefore, even when you find a car that provides you with a tax charge your happy with, it is likely that will increase year to year.

Fuel

If your employer provides you with fuel as well as your car, this will have a separate tax charge too.

We recommend carefully considering all of your options. As despite the perception of company cars being ‘free’ they can in some cases work out more costly for an employee.