Alternative Route Leasing are finding this question being asked more so now than ever before, and for a very good reason.
As we move closer to the end of the tax year, it’s a reminder that anyone who enjoys the benefits of running a company car, will shortly receive a brown envelope with a letter advising of their new tax code for the coming tax year. For the company car driver, your car, will more than likely cost you more than last year.
The company car has always been perceived as a real benefit, and in many circumstances it still is. However, now is the time to choose wisely. Benefit in kind tax rates are increasing in future tax years at greater levels than many company car drivers realise. Many new cars are acquired via lease, with the intention to remain in that vehicle for three to four years. With projected tax increases, it is highly likely the tax you pay in year three or four, will be significantly more per month than when you took delivery of the car.
Neil Carlton, Director of Alternative Route Leasing, said “My business partner Andrew Garaway and I have been suggesting for many years now, that company car drivers should seek as much advice as possible before choosing the car they will be running, and not fall into the classic ‘let your heart rule your head’ as this could prove very costly in the future”.
There are plenty of low emission vehicles available now. Within the next few years the choice will increase significantly. As things stand with planned tax legislation, the benefit in kind charge for pure electric vehicles is reducing significantly from the 2020/2021 tax year. One of Neil’s clients was advised that her monthly tax cost, for the car she has chosen for the 2019/2020 tax year, will be £187.33 per month. Assuming the current rulings don’t change, for the 2020/2021 tax year, her tax cost will reduce to just £23.41 per month. Many company car drivers are now taking this on board; and using these savings as an effective way of securing a pay rise in 15 months time.
Now of course a pure electric vehicle won’t suit some people due to the limited driving range, but there are Hybrid options which will travel further. Mainstream manufacturers are now coming to the market with electric vehicles that will cover 250 miles plus on a single charge. These cars will soon be at a price point similar to current petrol/diesel equivalent models.
There is huge change coming over the next few years in respect of the choice of hybrid and electric cars. It’s imperative that company car drivers think very carefully before choosing their next car. The tax costs are increasing significantly, certainly in the medium term. The Directors of Poole based Alternative Route Leasing suggest proper advice is sought and all options considered before entering into any form of long-term vehicle lease. However, there are car choices available to mitigate these tax increases.
So, are Electric or Hybrid cars the future choice for company car drivers? For many it will. Neil says, “One thing is for sure, whether you are a company car driver, fleet manager or owner of a local business, that offers cars to employees as part of their remuneration package; the choice you make now could potentially save your valuable staff money in the future. Maybe it could be seen as giving a pay rise without actually giving a pay rise”
Neil and Andrew can be contacted via e-mail – neil.carlton@alternativerouteleasing and andrew.garaway@alternativerouteleasing .co.uk or find them on LinkedIn