Days Contract Hire share their views on the increase to company car tax increases announced in Budget 2014
Online PR News – 11-April-2014 – Swansea – As company car tax rises, many fleet decision makers including Days Contract Hire may have to go back to the drawing board to compile company car contract hire choice lists if taxes continue to increase over the next five years as planned.
If benefit-in-kind tax increases during the next 5 years are kept to a minimum, some employees will face a tripling in their liability.
Last months Budget announced company car benefit-in-kind tax changes, which have sent confusing and mixed messages to fleet management companies and fleet decision makers in particular as it affects drivers with cars of higher emission as they will be facing the lowest tax increases.
Chancellor of the Exchequer George Osborne stated in his latest Budget statement that he planned to use the company car tax system to ‘increase the discount’ for ultra low emission vehicles.
Low emission vehicles with 75 g/km or less CO2 emissions are the cars that will be most affected by the benefit-in-kind increased rates above cars with higher emissions.
Changes expected across the next five years as announced in both the previous and most recent Budget updates are as follows:
• From 6th April 2015, the introduction of two new company car tax bands at 0-50 g/km of CO2 and 51-75 g/km of CO2.
• From 6th April 2016, the 3% tax surcharge on diesel company cars is to be removed and will be equal to petrol models.
• From 2017 – 2019, the Chancellor has announced that the appropriate percentage of list price for cars emitting more than 75 g/km of CO2 would be subject to a tax increase of 2% bringing the percentage to a maximum of 37%.
However, the Chancellor has altered plans for the two lowest thresholds, which are 0-50 g/km and 51-75 g/km and also adjusted the rates between them and the 76-94 g/km.
In Budget 2013, the Chancellor said that the percentage increase would be 3% in 2017/18 reducing to an increase of 2% in 2018/19.
However, the plans changed again in Budget 2014 stating that the increase would be 4% for 2017/19 reducing to 3% in 2018/19; it is this change that has raised concerns amongst fleet decision makers.
The higher threshold is to incentivise companies and employers to take up low emission cars for employees however in reality, these low emission models will mean drivers will face larger increases in their tax bills over the next 5 years.
Ultimately, employees will see company car benefit-in-kind tax bills increase and employers will notice a rise in Class 1A National Insurance contributions.
Alex Williams, Director of Days Contract Hire has said; “The Government is sending the fleet industry confusing signals. While it wants businesses and company car drivers to select ultra low emission models they will be subject to the highest tax increases over the next five years.
“Simultaneously, the Government’s previous decision to remove the 3% diesel surcharge was welcomed, but it is the increase in the use of diesel engined vehicles that is at the route of European Union and ministerial concerns over air quality standards. As a result, we can expect to see more towns and cities introducing ultra low emission vehicle zones such as the one being planned by Transport for London for 2020.”
“We will continue to advise clients to base company car choice lists on vehicle whole life costs. Even with benefit-in-kind tax rates to increase significantly for ultra low emission cars over the next five years, we would anticipate tax rises to be at least partially offset by fuel bill savings - the lower a car’s CO2 figure the better its fuel economy.
“Nevertheless, ultra low emission cars, including the new breed of pure electric and range-extender models, typically have significantly higher list prices than similarly sized petrol and diesel-engined models.
“Therefore, we will be working with our customers to help them compile choice lists that deliver to drivers the best possible selection of tax competitive vehicles, while continuing to ensure they are fit for purpose and taking in to account whole life costs.”
Days Contract Hire is an independent fleet solutions company whose services include tailored contract hire leasing and flexible car hire services to the public and private sector. Visit the Days Contract Hire website if your company requires further information on the latest Budget updates, impartial advice on company car leasing and contract hire or flexible short term car leasing for employees.