Company Car Tax - 4 Year Lease Question

fuzed

Its time to replace my company car, and I'm looking for an electric vehicle.  I've found the one that I want, but its on a 4 year lease.  The boss has advised that I will get 'hammered' by tax in the 4th year and to check the government website for rules.  I just can't find anything about this, does anyone know anything more about 4 year company car leases and tax implications?

nick74

All that affects your tax position is the list price, fuel type, CO2 emissions (if any, obviously none with an EV) and the dates it is made available to you.

How the company finances the car, eg bought, leased, HP, borrowed, stolen etc has no effect whatsoever on the tax you pay as an individual.

molerat

The rate is staying at 2% for the 24-25 tax year.  Who knows what will happen then as more and more go electric the treasury revenue will fall so it will have to be made up from somewhere.

Pennywise

I think he may be referring to the increases (both announced and expected) in BIK rates for electric cars over the coming years.  The current low rates of BIK won't be with us forever and is only "firmed" up to 2024, i.e. 3 years.  What happens in 4 years, i.e. 2025 is anyone's guess.  So I think your boss may just be being cautious and warning you that low present rates of BIK aren't guaranteed for year 4.

fuzed

Thank you guys/girls, I think she misunderstood the way the tax rates work - I read it at staying at 2% for the 4th year.

I just couldn't find a link for the 4th year on HMRC webiste, but leasing sites detail it.

fuzed

Pennywise said:

I think he may be referring to the increases (both announced and expected) in BIK rates for electric cars over the coming years.  The current low rates of BIK won't be with us forever and is only "firmed" up to 2024, i.e. 3 years.  What happens in 4 years, i.e. 2025 is anyone's guess.  So I think your boss may just be being cautious and warning you that low present rates of BIK aren't guaranteed for year 4.

Thanks Pennywise, as far as I understand the BIK rate is frozen for 2024/2025 as well, this was announced in the budget this year.  I've found a few articles on it, but couldn't find anything on the government website which has this in tabular form.

Grumpy_chap

Even if the Government state the rates of BIK are fixed for the next three years, that can change at any time - watch the forthcoming budgets.

As for what happens in 2024/5 tax year, the next GE is scheduled for May 2024 so anything could happen after that.  It also means that sharp increase in BIK would seem less probable in 2024 than might otherwise be the case.

Then again, the Fixed Term Parliaments Act might be repealed and we could have a GE at any time.

I'd probably rely more on the general sentiment across the main political parties to be encouraging more EV and fewer ICE as the more reliable guide to whether there will be significant uplifts in the BIK on EV's rather than anything that has been set as a "commitment" in the budget tables.

Base your car choice decision on the BIK rates as set out (https://www.autoexpress.co.uk/car-news/consumer-news/90125/company-car-tax-guide) and hope they don't change to your detriment within or after the three years that are "set".

nick74

Although future BIK rates cannot be known with certainty, I think it's fair to say that conventional petrol and diesel cars will probably be 'hammered' far more for tax in the next few years than electric vehicles. This uncertainty is arguably a reason to choose an electric car, rather than a reason not to choose one.