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Tax on some company cars set to increase next month

Tax on some company cars set to increase next month

Contractor accountants should be aware that Lex Autolease, the largest car fleet supplier in the UK, had a stark warning for higher rate tax payers recently.

The firm surveyed more than 16,000 companies and estimated that the reduced fuel emission allowance for company vehicles could cost tax payers in the higher rate bracket an extra £400 a year.

Lex Autolease’s principal consultant, Paul Lippitt, said that senior management may not be too concerned that they need to pay an extra benefit in kind charge if they’ve got a low-emitting BMW 5 Series vehicle, but middle and junior level managers could be in for an unwelcome surprise.

New changes are due to come into place this April and these will lead to an increase in car tax on 45% of orders for new vehicles.

Under current regulations, Qualified Low Emissions Cars are classed as those that have fuel emissions of less than 120g/km and these attracted a benefit in kind tax of only 10%. However, as from April, the QUALEC limit is being reduced to emissions of less than 99g/km.

Only 8% of the companies surveyed will satisfy these revised conditions from HMRC, meaning that employees will need to pay more tax and employers will be liable for additional National Insurance contributions.

Lippitt went on to say that many employers could be trapped as the typical company car contract runs for three or four years. The CO2 tax threshold will reduce again in 2013/14, so companies should be aware that further tax increases are to come.

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Image: BMW 5 series. by Rob Ellis’

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