Just a few years ago, Company Car was considered one of the best benefits packages for employees, but now corporate car tax is still increasing and several companies are therefore deciding to take the options. A car allowance that can be monetarily stable for both the undertaking and representatives is the most well-known choice to offer.
If you discover it hard to make a decision which choice to choose from a corporation car or a car payment, then cheap accountants in London will assist you to understand both advantages and drawbacks.
Why is Car Allowance Better?
Some people consider car cash allowances, not a company car, which means you can use your personal vehicle and receive your employer's kilometer-based cash incentive in return. This is called the Inland Revenue Authorised Mileage Rate (IRAMR).
Maintaining a car allowance, most employees enter into a PCP agreement. The amount of the PCP's loan particularly covers the vehicle's depreciation over the period of time and not the full value of the agreement.
This contributes to reducing monthly costs and also limits employees to a multiannual fixed-term agreement, which can threaten those who do not consider themselves safe.
The employee is liberal to return or buy the vehicle or enter into a replacement PCP agreement if the agreement period expires.
Meanwhile, employees are entitled to reimburse the employer or their income tax bill for a business milage.
The company car provides greater security compared to a PCP deal and does not need the driver to worry about issues like automobile maintenance, insurance, service costs, and so on.
Calculating the Benefit Tax
One of the major obstacles to a company car is the calculation of the benefits tax benefit in child, BIK. It is a tax because you are going to use the vehicle for your own use. This is an advantage in kind, and the tax rate depends on the price of the car P11D, depending on the CO2, emissions of the car.
Because the price of the P11D is the price for the list car plus the VAT, plus delivery and over £100 all options, you can work out the price of the P11D. Multiply by the CO2 emission percentage then multiply by 20 percent or 40 percent by your income tax band.
What if I own my own business?
The choice changes significantly in the event that you own your own organization, and along these lines, the duty treatment shifts enormously predictable with your conditions and your driving vehicle. Low emission cars also attract higher allowances, so it's very important to select the right car.
Furthermore, registered companies can claim some of the VAT used on leasing or purchase price.
In addition, it affects whether drivers are going for a company car or for a personal lease agreement.
If this structure is not properly organized, people begin to look for PCPs with their cash allowance. In some way, it allows more choice and hence more flexibility for the production company.
For more information, contact our accountants and get advice
