1301_Choosing_Company_Car_On_BIK landscape
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Choosing_a_company_car
As the tax regime changes, so company car drivers are moving to low emissions cars that attract less tax

IF you thought image and creature comforts were the driving forces behind a company car driver’s choice of vehicle it’s time to think again.

There was a time when car specification was the number one influence, but now business users are more interested in maximising their take-home pay.

In 2012, ALD Automotive’s survey of 1000 company car drivers found specification to be the most important factor (25%) in choosing their next car, over fuel economy (22%) and company car taxation  (14%). (Company car tax is calculated from the benefit in kind (BIK) that the car represents – a product of its price and its CO2 emissions.)

The 2013 survey has just been released, however, and reveals a major change in attitudes, with twice as many (39%) drivers classing company car tax, or BIK, as the most influential factor.

Car spec was unchanged at 25% and fuel economy was in third place at 17%.

Helen Fisk, AutoSolutions Manager at ALD Automotive, said the March 2013 budget was the turning point. Low emission cars are now no longer exempt from company car tax, the diesel supplement is to be removed from 2016, and most drivers will see uplifts in company car tax rates over the coming tax years.

She said: “Following the Budget we’ve seen BIK propelled to the top of the list of drivers’ priorities as they look more carefully at their opportunities to minimise their exposure.

“It’s clear that drivers are planning for future rises by selecting vehicles with low enough emissions to last a typical three-year agreement period. Even as the economy improves, maximising take home pay remains a priority for many company car drivers.

“Interestingly, it seems fuel economy is becoming less of an issue for drivers. This could be because drivers have become immune to higher fuel prices and are, therefore, switching to fuel efficient models with a lower BIK rate.”

Fisk concluded: “Company car drivers are typically the first-in-line to take action and react to changes in legislation, as well as adopting new models and technology from manufacturers, especially when it saves them and their company money.

“The results from our survey help us to carefully monitor changing driver demands and seeing how the influence of BIK has more than doubled in the last year only supports our advice to fleets that they must use a total cost of ownership programme to balance cost, flexibility and choice to identify the optimum fleet policy.”

 

What is BIK and how does it affect me?

How does BIK work?

Well, a company car attracts a benefit-in-kind (BIK) liability which translates into a company car tax payment.  The benefit in kind is determined by two factors: the cost of the car (its P11d value) and the level of the car’s CO2 emissions (expressed as g/km) based on a percentage scale. The BIK is worked out by multiplying the P11d value of the car by the percentage derived from the emissions level. You then pay company car tax on the BIK according to your income tax rate.

The lower the car’s P11d price and the lower the CO2 banding on the HMRC emissions table (see our Company Car Tax table), the lower the BIK, and the less company car tax you’ll have to pay.

For more information read our essential guide on How to understand company car tax.

 

Fancy paying less in BIK?

 Click here for our top five low emission company cars. 

 


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