The end is nigh...

[humpy999]

Well, if HMRC gets it's way the whole tax efficient company car scheme thing is dead... Any company car driver will be taxed and NI'd on the full value of the salary or cash equivalent that they are foregoing which kills the whole incentive of new CO2 efficient vehicles as far as I can see. I'll be stuck in contract on my 330e presumably well past the April 2017 introduction so we'll have to wait and see if that makes a difference or if everyone gets caught.

https://www.ft.com/content/702b2a9a-6dc7-11e6-9ac1...

https://www.gov.uk/government/uploads/system/uploa...

Edited by humpy999 on Wednesday 31st August 14:02

[bp1]

Its not company car schemes though, its salary sacrifice schemes.

So (generally large) company doesn't provide a car as your position doesn't require/merit it but will allow you to leverage their buying power and current salary sacrifice rules to allow you to offset some of the cost of a car to the tax man. That's what the tax man is looking to stop.

[supermono]

For clarity the OP mentions changes to salary sacrifice schemes not BIK rates for company cars. So the party continues for those who run company cars at least for now.

However, it's obvious from the number of PHEVs running around Westminster enjoying free parking, free electric and avoiding the Kenge$tion Charge and (no doubt) sweet BIK rates the end will soon be nigh for the rest of us too.

[oop north]

I think there is a consultation on the taxation of low emission vehicles on the rounds at the moment too. Seems likely the phev's will suffer a bit as a result

[JumboBeef]

If I take out a 3 year salary sacrifice on a hybrid, does this mean my payments might jump during the term?

Might this affect 'normal' cars?

Thanks.

[humpy999]

It does affect company car schemes where employees could get cash if they choose NOT to take a car. So the only schemes that would survive are those where you have to take a car or get nothing as an alternative. It's not just the pure salary sacrifice ones.

I've just cancelled an order for an XC90 T8 because I think that, if the Chancellor moved to change salary sacrifice schemes, people stand a real chance of getting clobbered midway through their contract and can't get out. I might yet still get caught on my 330e...

Edited by humpy999 on Sunday 4th September 09:02

[humpy999]

bp1 said:

Its not company car schemes though, its salary sacrifice schemes.

So (generally large) company doesn't provide a car as your position doesn't require/merit it but will allow you to leverage their buying power and current salary sacrifice rules to allow you to offset some of the cost of a car to the tax man. That's what the tax man is looking to stop.

It's any scheme where there is a cash alternative and the tax you pay on the benefit is less than the tax you would have paid on the cash. This would affect leasees of ALL cars if you're in the 40% bracket as there aren't any cars at 40% BIK. Clearly people who are currently enjoying 7% BIK would be hit hardest.

[JumboBeef]

I'm a humble nhs employee earning under the higher tax threshold. A 330e on 15k/pa is £300/month including everything apart from fuel. Nil deposit. Or volvo twin engine for £370.

Does anyone know what might happen to these figures please?

[humpy999]

If the government adopted their proposals it would mean that instead of paying tax on 11% of the car's value you'd effectively pay your marginal tax rate (and NIC) on the salary you forewent. i.e. you'd have the car but you would pay tax as normal on the salary you would have otherwise have received so there would be no difference between leasing the car through the scheme or with your net salary.

So, based on £300 per month you're foregoing £3600 per year and paying tax equating to 20% of 11% of about £36000, roughlly £800 . If these rules are implemented your tax bill will go up to 30% (20% IC +10% (NIC)) * £3600 = £1080. Difference is about £280 a year or £25 per month.

Edited by humpy999 on Sunday 4th September 12:28

[sawman]

JumboBeef said:

I'm a humble nhs employee earning under the higher tax threshold. A 330e on 15k/pa is £300/month including everything apart from fuel. Nil deposit. Or volvo twin engine for £370.

Does anyone know what might happen to these figures please?

I am no tax expert, but I think it might mean that the savings you would currently get in income tax and NI, may disappear. If you are looking at nhs fleet solutions quotes, these are itemised so you can see the possible impact.

I was considering a plug in hybrid lease, but think I will hold off for a while to see how it pans out

[jkh112]

humpy999 said:

So, based on £300 per month you're foregoing £3600 per year and paying tax equating to 20% of 11% of about £36000, roughlly £800 . If these rules are implemented your tax bill will go up to 30% (20% IC +10% (NIC)) * £3600 = £1080. Difference is about £280 a year or £25 per month]

Next year the company car tax rate of 11% goes up to 13% and up to 16% the year after. So for next year the company car tax would be £930 and it would be £1150 the year after. The new proposals would actually work out cheaper, and that is on a low emissions car, the relative savings on a high emissions vehicle would be even greater.

[JumboBeef]

Thanks. Not going to worry about £25 or so increase.

[humpy999]

jkh112 said:

Next year the company car tax rate of 11% goes up to 13% and up to 16% the year after. So for next year the company car tax would be £930 and it would be £1150 the year after. The new proposals would actually work out cheaper, and that is on a low emissions car, the relative savings on a high emissions vehicle would be even greater.

The way the wording goes you'll pay the BIK or tax on the cash equivalent whichever is greater.

[jkh112]

In which case it will have no effect on company car tax, given that in 2 years even a low emissions car will have higher bik tax than this new tax proposal.

[oop north]

A big part of the reason for the push for this is national insurance - if you look at the examples in the consultation document, employee national insurance is incorporated in the calculated savings. So any comment above just commenting on the tax increase is missing the extra 2% or 12% employee NIC. It also (worryingly) raises the prospect that HMRC may seek to apply NIC on all benefits in kind. That would raise a lot and be a big disincentive to employers to offer benefits in mind in general

[humpy999]

jkh112 said:

In which case it will have no effect on company car tax, given that in 2 years even a low emissions car will have higher bik tax than this new tax proposal.

It completely depends on the individual circumstances. Worst case scenario you could be on a 40 or 60% marginal tax rate and in a sacrifice scheme paying tax on 11% of a car's value...

[DragonflyTrumpeter]

jkh112 said:

Next year the company car tax rate of 11% goes up to 13% and up to 16% the year after. So for next year the company car tax would be £930 and it would be £1150 the year after. The new proposals would actually work out cheaper, and that is on a low emissions car, the relative savings on a high emissions vehicle would be even greater.

You are ahead of yourself, no? Next year the current company car tax rate of 7% (to 5/4/17) goes up to 9% then 13% the year after and 16% in the tax year to april 2020 for low emission cars.

[sawman]

DragonflyTrumpeter said:

jkh112 said:

Next year the company car tax rate of 11% goes up to 13% and up to 16% the year after. So for next year the company car tax would be £930 and it would be £1150 the year after. The new proposals would actually work out cheaper, and that is on a low emissions car, the relative savings on a high emissions vehicle would be even greater.

You are ahead of yourself, no? Next year the current company car tax rate of 7% (to 5/4/17) goes up to 9% then 13% the year after and 16% in the tax year to april 2020 for low emission cars.

i think a volvo plug in hybrid was mentioned with regards these BIK taxes, so its 11,13,16

[DragonflyTrumpeter]

sawman said:

i think a volvo plug in hybrid was mentioned with regards these BIK taxes, so its 11,13,16

Fair enough. When I looked at the options before, I though the volvo was 7, 9 + 13 for the 3 year period from 6/4/16 as well. My memory is not what it used to be obviously.

[JumboBeef]

DragonflyTrumpeter said:

sawman said:

i think a volvo plug in hybrid was mentioned with regards these BIK taxes, so its 11,13,16

Fair enough. When I looked at the options before, I though the volvo was 7, 9 + 13 for the 3 year period from 6/4/16 as well. My memory is not what it used to be obviously.

What would that do to payments which are today of £370 please? Normal rate tax payer on salary sacrifice.