01722 420920
Let the experts help choose your industry

The future of company vehicles

The UK Government has pledged that by 2040 all new cars sold will need to be either electric or some form of plug-in hybrid.

However, before this deadline was even announced many within the motor industry believed that by 2025 as many as one in three cars will incorporate an electric power plant.

Much of this has been spurred on by new research which shows the damage that vehicles are doing to the environment and people’s health.

The drive to go electric is therefore growing at a rapid pace, which raises the question, what will happen to the company car in the future?

Company cars are considered a ‘Benefit In Kind’ (BIK), as the use of the car is considered by HM Revenue & Customs (HMRC) to have ‘monetary value’. For this reason company car owners are expected to pay tax on the vehicle if they use it privately. The rate of tax is based on a number of factors including its value and the type of fuel it uses.

However, there are some tax reductions available if:

  • It is only owned part-time (such as if the vehicle is shared by another person)
  • The employee pays some of its purchase cost
  • It has low or no CO2 emissions.

Company car tax bands are not the same as normal Vehicle Excise Duty (VED) tax bands as there are currently 30 different levels based upon emissions, compared to just 13 for VED.

The regime works so that the least polluting company car models pay a lower BIK rate, while the highest polluters pay more.

However, each tax year the rate changes. For example, from April 2016, electric vehicles (EVs) and ultra-low emission vehicles, which were once exempt, have faced a seven or 10 per cent BIK rate.

In the past, rules on emissions saw many owners switch to diesels with lower CO2 emissions, but they now face a three per cent surcharge over petrol models with similar emissions, because they emit more harmful particulates.

As a guide, BIK tax rates are likely to increase by around 2-4 per cent within each CO2 band year-on-year from 2017 to 2020.

However, it is important to note that by 2020 the maximum 37 per cent rate is reached at just 165g/km for petrol cars and 150g/km for diesel.

To work out the tax cost employees will also need to look at the P11D value, which takes into consideration the list price of the car, including options, but less non-taxable items.

If the car costs less to buy than the official P11D value, it won’t save you tax, as HMRC still says the BIK value is the same.

To complicate matters further, changes are currently taking place if the car has been offered as part of a salary sacrifice scheme, or if cash has been offered as an alternative to a car.

From April this year, those who choose the latter will be taxed either on the BIK value of the car offered or on the value of their cash alternative, whichever is higher.

This means that drivers who select a car with a low P11D value and/or a car with low CO2 emissions may no longer benefit from a reduced tax bill.

Similar changes will also take place for those who benefit from salary sacrifice schemes.

Previously they were taxed on the BIK value of the vehicle and, depending on the choice of vehicle, were able to make income tax savings by paying for the car out of their gross salary.

From 6 April 2017, drivers are now taxed on the higher value of either the amount of cash forgone or the BIK value of the car, meaning that they will suffer the same fate as those who would choose a cash alternative and will see their tax liability rise as they will have to pay income tax on the full amount of the cash foregone.

For drivers of existing salary sacrifice scheme cars, or those who ordered a new car before 6 April 2017, the existing tax arrangements stay in place until 5 April 2021 or until a ‘change in arrangements’ has taken place.

LINK: HMRC Company Car Tax Calculator

Latest News

Spring Statement 2018

By the time Chancellor Philip Hammond rose to his feet in the House of Commons to deliver the first Spring Statement, he had already offered plenty of hints that this would be a low-key affair.

Gone was the primetime Wednesday slot after Prime Minister’s Questions, gone was the trailing of policy announcements in the days and weeks beforehand and gone was the set-piece photo call with the red box outside Number 11.

This was all carefully orchestrated. Mr Hammond could not have been clearer that there were to be no rabbits pulled from hats.

In line with the move towards a single fiscal event each year, this was to be a straightforward response to the Office for Budget Responsibility’s (OBR) updated economic forecasts, dispensing with the usual drama of Budget Day.

Indeed, Mr Hammond may well be relieved that he does not need to deliver a Budget until the Autumn. A year ago, his first Budget was widely seen as disastrous for the Government, with the Chancellor having to quickly backtrack on heavily-criticised tax rises for the self-employed, providing helpful ammunition for the opposition at the subsequent general election.

Nevertheless, being the first of its kind, the Spring Statement was still something of an unknown quantity and the business community was still curious to see what he might have to say as they waited for the cheers and jeers to quieten in the Commons.

As it turned out, the Chancellor stuck to his guns, saying at the start of the speech that the UK had been unique amongst major economies in making tax changes twice each year. He added the move to a single fiscal event is intended to give greater certainty to business.

The Economy

There was a strong emphasis on jobs in the Chancellor’s assessment of the state of the UK economy. He noted that the wages of the lowest paid have increased by seven per cent since 2015 and that there are three million more people in work since 2010. He told MPs that the OBR now predicts 500,000 more people will be in work in 2022.

The OBR revised up its GDP growth forecast for 2018 from 1.4 per cent to 1.5 per cent. This is then predicted to remain in line with previous predictions at 1.3 per cent in 2019 and 2020, before rising to 1.4 per cent in 2021 and 1.5 per cent in 2022.

Following the recent rise in interest rates, the OBR now expects that inflation will now return to its two per cent target over the next year, while wages are expected to rise faster than prices over the next five years.

The Chancellor said figures show that the manufacturing sector has enjoyed its longest period of expansion for half a century.

The Public Finances

Moving to the state of the public finances, the Chancellor noted that the UK has now had its first sustained fall in public sector debt for 17 years, saying that this represents a ‘turning point’ for the economy.

Debt as a percentage of GDP is expected to fall from 86.5 per cent in 2018-19 to 77.9 per cent in 2021-22.

Meanwhile, borrowing is now forecast to be £45.2 billion in 2018, £4.7 billion less than had been predicted by the OBR in November 2017.

In the wake of what he was eager to present as positive predictions, the Chancellor said that he is on course to increase public spending at the Autumn Budget, so long as the OBR’s predictions for the public finances are borne out.

Business measures

Mr Hammond said he was keen to support British business, before promising that the next business rates revaluation exercise will be brought forward by one year to 2021, meaning rates will better reflect current rental values.

He also said that there will be a review of how to tackle the problem of late payments, which are seen as an ever-increasing problem for SMEs in particular.

Continuing the theme, and appearing to go against the suggestion that there would be no spending commitments in the speech, Mr Hammond said the Education Secretary will make up to £80 million available to small businesses to take on new apprentices.


As had been widely expected, Mr Hammond took the opportunity to announce a number of consultations on the future of the tax system.

Top of the Chancellor’s list was a consultation on ‘Reducing single-use plastic waste through the tax system’. He said the Government is inviting views on how to tackle the problem of plastic waste through the tax system.

He also set his sights on large multinational digital businesses, publishing a position paper on ‘Corporate tax and the digital economy’, including measures relating to VAT.

Maintaining the focus on the digital economy, the Chancellor announced a consultation on the role cash will play. He said the Government will seek views on how to support consumers and businesses to use digital payments, while ensuring those who need to can continue to use cash. The consultation will also seek views on the use of cash in tax evasion and money laundering.

Meanwhile, the Chancellor also said that the Government would consult on extending tax relief for employees and the self-employed who fund their own training.

Although not mentioned in the Chancellor’s speech, the hours following the Statement also saw the Treasury publish a consultation into the VAT registration threshold, suggesting that the current flat threshold disincentivises businesses from pursuing growth.


One of the biggest advantages a politician has in Government is the ability to set the terms of the political debate and to mark where the dividing lines should fall.

That is what the Chancellor appears to have aimed for with his first Spring Statement. He made a clear statement of intent on the Government’s direction of travel on tax and spending by hinting at spending increases in the Autumn Budget.

Much of the debate in the coming months is likely to revolve around the question of who should benefit from any increases.

So while there were no specifics on tax and spending for businesses to take away from the speech, there were important indications about what may be to come for businesses and the economy.

"Fawcetts take a very professional approach via every point of contact. The management team would not hesitate to recommend the services of the Fawcetts team to any business regardless of size and industry"
G Blamire - Salisbury
"Through personal experience i have experienced that the size and scale of a business is immaterial to Fawcetts - the commitment is always the same and they really make you feel as though you and your business matters."
Lou Whiting - Salisbury
"James has always gone beyond the traditional approach of just accounting for what we have already done and continues to help us develop our company in testing times."
Steve Rawlins - Gosport
"Fawcetts provide excellent support tailored to our business needs. They are always available for advice and have a reassuring and professional approach that makes you feel as though you are their only client."
Brian Keane - Stockbridge
"I have been very impressed by the service and support I have received and I'm looking forward to working with Fawcetts to grow Travel Waves Marketing to the leading Marketing Services Company here in the South West."
Claire Riches - New Forest
"We have been very impressed with the excellent high level of professional service and care that Custom Property Care Ltd have received from Fawcetts Accountants. They have dealt with all our needs efficiently and to a very high standard"
Kelly B - Salisbury
"A breath of fresh air' - Straight forward, understandable, approachable, informative, good value accounting. Xero accounting is so quick & simple to use!! Thank you. I enjoy my side of the deal now!"
Sue S. Devizes
"They are a modern and forward thinking company who love working with small businesses and start-ups; helping them grow online by offering relevant services along with pro-active advice."
Jack McConnell - Bath
"James has been a huge help to me as I look to incorporate Creativemint, talking me through all the options, offering advice and helping me to feel relaxed and happy about the transition and services I will need."
Miles Murray - Salisbury
"Nick has been a great help year on year providing my business with efficient services and ever useful and practical advice."
Mrs Zanne St John Marchmont
"We have found Nick to have an exceptional ability to grasp the issues we have as a law firm operating internationally. He helped us to manage our set-up and has guided us as we grow, and is considered to be one of our most trusted advisors."
Andy Leppard - Somerset
"We would have no hesitation in recommending Fawcett's for any accounting requirements and we look forward to many more years working together with them."
Jeremy Chalke - Salisbury
"I chose Fawcetts due to their excellent reputation. Whilst there are a number miles between my work base and my accountant; distance has never been as issue as they are always very responsive."
Julian Bennett - Bournemouth