Company cars hub Skoda sponsored strip - desktop
sponsored

How to keep your company car tax bill low

Hints and tips on how to pay less company car tax without breaking any rules...

Mercedes EQC charging

Nobody likes paying tax. But make some smart choices about your next company car, and you can keep your next benefit-in-kind (BIK) tax bill to a minimum.

Here's how...

Go electric

The easiest way to cut your company car tax bill is to choose an electric car.

Time is running out to take advantage of the 0% tax band for 2020/21, but with a 1% rating in 2021/22 and a 2% banding in 2022/23, an electric company car is an absolute steal.

With impressively practical range, refined comfort, helpful driving aids and a well-developed charging network, going electric is perfect for fleet drivers

Avoid expensive options

Company car drivers pay tax on a portion of the car's price for tax purposes, often referred to as the P11d.

This is the on-the-road price, less the cost of registration and the first year's car tax. It's crucial to remember that the cost of option is included. Start ticking lots of option boxes on the order form and the P11d value will rise – and so will your tax bill.

Instead, look for a car that's well equipped as standard and keenly priced.

Costs and options

Choose a fleet-specific model

Some manufacturers introduce specification levels aimed at business drivers.

For example, Vauxhall offers the Grandland X in Business Edition Nav specification, with a low list price so company car drivers will enjoy lower tax bills.

On paper it's cheaper than the SE Premium entry-level car, although retail customers will be able to buy the other models in the range at a healthy discount, whereas the fleet-specific model is already pegged at a likely transaction price. It's a sleight of hand that makes the Business Edition Nav a tax-efficient choice.

Vauxhall Grandland X

Don't specify big alloys

Under the WLTP emissions tests, manufacturers quote a range of CO2 figures for mechanically similar cars. Equipment that adds weight, drag, or rolling resistance will increase emissions.

So however purposeful they look, be wary of specifying a car with larger alloys. This generally pushes up CO2 emissions by a few grams per kilometre.

For example, the Audi Q3 35 TDI S tronic Technik rides on 17-inch alloys, and emits 141g/km of CO2. The Q3 35 TDI S tronic Vorsprung has the same engine and gearbox, but fills the wheelarches with 20-inch alloy wheels. It emits 154g/km, enough to push the car up by two tax bands.

LT Audi Q3 Sportback front

Use a pool car

When is a company car not a company car? When it's a pool car.

A pool car that you use for business miles, but which isn't available for commuting or private mileage, isn't considered a benefit. No benefit, no benefit-in-kind tax.

Of course, this means you'll need to find another way to get around when you're not at work. But if you live close to the office, especially if you have shopping and leisure facilities on your doorstep, a true company car could be an expense you can live without.

This solution won't be for everyone, but if you rarely need a car you may be better off joining a car club or hiring a car when you need one.

Ford Focus side action

Drive a pick-up

Double-cab pick-ups can be workhorses in the week and family cars at the weekend. What's more, because they are classed as light commercial vehicles they are taxed differently to an ordinary passenger car.

So long as a pick-up has a payload of at least a tonne and is available for private miles as well as business use, the driver pays tax on £3490 (2020/21 tax year). So for a 40% taxpayer, a pick-up will set them back £116.33 per month.

Let's compare that with a regular SUV. A Kia Sportage 1.6 CRDi 48v Mild Hybrid GT Line manual emits 154g/km, and sits in the 33% tax band for 2020/21. With a P11d value of £27,320, that means a monthly bill for a 40% taxpayer of £300.52. So by choosing the pick-up instead, you'd be better off by £184.19 per month.

Even the best pick ups can seem a bit crude compared with a regular SUV or family car, but that's quite a saving...

Ford Ranger front

For all the latest reviews, advice and new car deals, sign up to the What Car? newsletter here

Quickly calculate your BIK bill with our company car tax calculator