The recent Autumn Budget has understandably drawn attention to key financial changes, including the increase in employers’ National Insurance (NI), the future inheritance tax implications, and the hike in capital gains tax rates. However, one significant change that has flown under the radar is the adjustment of company car tax rates, now set as far ahead as the 2028/29 and 2029/30 tax years. For businesses and employees utilizing company cars, this development is a mixed bag of news.
The Good News
The positive takeaway is that the government has provided clarity on company car tax rates for the next several years. This allows employers to plan long-term leasing arrangements with a clearer understanding of future costs. For businesses relying on company cars, such foresight can be instrumental in making informed decisions.
The Bad News: Significant Tax Hikes
Unfortunately, the good news is tempered by sharp increases in the tax rates, especially for hybrid vehicles. Here are the key points to note:
Hybrids:
Efficient hybrid cars with CO2 emissions of 1-50g/km and an electric mileage range of 130+ currently attract a benefit-in-kind (BIK) tax rate of just 2%. This rate will rise to 5% by the 2027/28 tax year. However, starting in 2028/29, the government will remove electric mileage range considerations for hybrids altogether. The result? The BIK rate jumps from 5% to a staggering 18% in one year.
Electric and Zero-Emission Vehicles:
For zero-emission and electric vehicles, the tax rates will also see steady increases. The current system caps annual increases at 1% through to the 2027/28 tax year. After that, the rates will climb by 2% each year, reaching 7% in 2028/29 and peaking at 9% in 2029/30.
Fuel Benefit Charges and Knock-On Effects
The higher BIK rates will also lead to increases in associated costs, such as the car fuel benefit charge. Employers and employees alike must factor these cascading costs into their planning.
What Does This Mean for You?
For businesses and employees considering company cars, these changes underscore the need for strategic planning. Whether you’re a business owner or an employee benefiting from a company car scheme, now is the time to reassess your options.
At WBV Accountants, Swansea and Neath, we’re here to help you navigate these changes and their potential impacts on your business and personal finances. Whether you’re reviewing your company car policy, considering the implications of hybrid and electric vehicles, or calculating the overall cost-effectiveness of offering company cars as a benefit, we can provide the guidance you need to make informed decisions.
With these tax increases set to unfold over the coming years, now is the time to review your strategies. Don’t let these under-the-radar changes catch you off guard.
Get in touch with our team at WBV Accountants today to ensure you’re prepared for the road ahead
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