How to Lower Your Company Car Tax Bill

In the world of taxes, company car tax is one thing you can’t escape. With around 700,000 people receiving company cars, it’s a common issue for many. However, there are ways to reduce your tax bill and keep more money in your pocket.

The Rise of Electric Cars

Electric cars have become a popular choice for company car drivers due to their lower tax rates compared to petrol and diesel vehicles. In fact, in the tax year 2021/22, the number of company cars with CO2 emissions of 75g/km or less increased significantly. Fully electric cars accounted for 17% of car benefit recipients, showing the growing popularity of electric vehicles in the corporate world.

Understanding Company Car Tax

Company car tax is calculated based on the car’s list price, CO2 emissions, and the employee’s personal tax band. The tax rates vary depending on the emissions level, with electric cars having the lowest tax rates. For example, an electric car with 0g/km CO2 emissions is taxed at just 2% of its list price until April 2025.

Tips to Reduce Your Tax Bill

1. Choose an Electric Vehicle (EV): Electric cars have the lowest tax rates and can significantly reduce your tax bill.
2. Consider a Plug-In Hybrid: Plug-in hybrids with long electric ranges also qualify for lower tax rates.
3. Be Selective with Options: Avoid adding expensive options that could push your car into a higher tax band.
4. Look for Fleet Trims: Some manufacturers offer fleet-focused trim levels with lower list prices for reduced tax payments.
5. Opt for a Tax-Efficient Commercial Vehicle: Commercial vehicles with specific weight and payload criteria have standard tax charges, making them a cost-effective alternative to traditional company cars.

By following these tips and choosing the right vehicle, you can reduce your company car tax bill and save money in the long run. Make informed decisions when selecting your company car to maximize tax savings and enjoy the benefits of a tax-efficient vehicle.