"Company cars are subjected to a Benefit in Kind tax known as BiK, and this accounts for the percentage of tax that will be paid based on the cost of your business car"
Making the decision to invest in a company car for your business certainly has its advantages, but there are a few important elements to think about. In this article we explore the average the levels of financial commitment that are needed to invest in business travel.
There’s much to consider choosing a company car, as your investment can vary significantly, depending on your firm’s requirements more specifically. Studies have found that within the total cars sold in the UK, 55% are company cars, which shows how popular they are for modern business owners. Company cars are subjected to a ‘Benefit in Kind’ tax (known as BiK), and this accounts for the percentage of tax that will be paid based on the cost of your business car without any non-taxable costs including the registration fee and first year’s free road tax- known as the P11D value. Carbon emissions are also an important factor in this, as the amount of BiK paid is determined by the fuel type and emissions value.
It’s also worth noting the financial advantages of having a company car for your business. A company car that uses petrol with a list price of £21,000 including accessories, and a carbon emissions rate of 185g/km, will be subject to a tax of £7,140. It exceeds the 120g/km emissions standard, which incurs a percentage rise from 13% to 34%, and for a basic rate tax payer the average tax paid on a business vehicle of this specification would be £1,428, or £119 a month. The environmental qualities of a company car can therefore have a big impact on the quality of it as a business investment.
Diesel cars also face a higher tax rate pm average, with an additional 3% supplement on top of the maximum charge of 37%., and the same basic rate taxpayer would face a charge of £1,554 or £129.50 a month. Many bigger company fleets are considering the use of alternative fuels, the popular taxi firm Uber is trialing a series of initiatives in London to help drivers to purchase electric vehicles. The company has also pledged to have an all-electric fleet by 2025, under which the taxable benefit would fall due the fact that electric cars produce little to no carbon emissions.
Another important factor to consider when investing in a company car is ensuring that you can cover your insurance premiums. Business vehicles are subjected to notoriously higher insurance payments, with one reason being that an employee may use the car for work and leisure purposes. Even an employees’ journey to and from work can bear influence on the type of cover they require, and it is vital to check that you have sufficient insurance on a company car, even if you are the sole user of the vehicle. Business vehicle insurance is required when you are driving to and from different work sites, or if you or a colleague is using the car to visit clients, covering many miles weekly. Business drivers are also more likely to drive on roads which they may not be familiar with, often during rush hour traffic. Overall, you should consider the purposes which you will be using your company car for, and select the appropriate policy based on this. For example, if you are supplying cars for your taxi or delivery business, you will need a commercial policy for your vehicle/’s, taken out on behalf of employees.
In Essence, a lot of thought goes into finding the perfect company car to invest in. The new Skoda Superb hatchback is a great option, listed in Carbuyers best cheap to run cars of 2019, it is fueled by innovative Greenline technology. Fuel economy is made ultra-efficient in the spacious Superb, and the emissions value falls safely under the limit at 110g/km. This places it within the 27% BiK bracket for business drivers, making it an environmentally and economically friendly choice. Depending on the exact specification, the Superb hatchback’s miles per gallon is on average 62.8, which does not affect the BiK classification.
As discussed, a well-calculated investment into business travel can be very beneficial for your business. The use of business travel can strengthen existing client relationships as well as building new ones. It is also perceived as an ‘investment in human capital’ as it promotes transparent communication, regular idea sharing and can even boost staff retention.