20 December 2017
With the ever-increasing benefit costs for company cars for both the employee and the employer, and the new rules for Optional Remuneration Arrangements (OpRA), is a company car as cost-effective as it once was?
I recently started the journey of choosing a new company car. I have always been sensible when choosing a company car, considering both the impact on my wallet and the environment, while ensuring the car was going to be suitable for family and long journeys for work every few weeks.
The first company car I choose in 2010 was a £20,000 low emission diesel. With CO2 emissions of only 119 g/km this attracted an appropriate percentage for car benefit charge of 13%, costing £43 (basic rate) or £86 (higher rate) in tax a month. Over the past seven years, engine technology has not kept pace with the increase in company car taxation. Choosing the closest equivalent today with CO2 emissions of only 99 g/km means that from April 2018 the tax cost will be £73 (basic rate) or £146 (higher rate) per month, a 70% increase. In fact, from April 2018 the lowest appropriate percentage will be 13% achievable only by cars with CO2 emissions of less 50 g/km.
If, unlike myself, you are a petrol-head, a new £30,000 Golf GTI with CO2 emissions of 145 g/km will end up costing from April 2018 £150 (basic rate) or £300 (higher rate) in tax alone per month. Add a fuel car and this will cost over £260 or £520 a month.
My situation was complicated even further by the fact that my contract offers a choice of company car or cash allowance. Under the rules introduced in April 2017 this is now a type B OpRA. This creates a charge to tax and class 1A National Insurance on the higher of the:
Having these arrangements means that choosing a low emission car may no longer be of benefit as tax will be based on the value of the cash allowance if
this is greater than the car benefit in kind value.
In addition to potential tax savings there are other advantages to taking the cash allowance. If the amount your employer pays in mileage allowance is less than the approved amount, you can claim Mileage Allowance Relief on the difference. This can be significant depending on the amount paid by the employer and the amount of business mileage.
Before deciding whether to take a car allowance or a company car you must undertake some simple steps to compare the costs:
Include tax reclaim for Mileage Allowance Relief if appropriate
I have always been an advocate of company cars over a car allowance for the peace of mind for the employee and the employer. However, after going through this process and understanding the scale of the savings that can be made the choice of moving to a car allowance was a simple one.
If, as an employer, you do not offer a car allowance then it may be worth reviewing your company car scheme to understand the cost in Class 1A National Insurance. It may be more cost effective for you and your employees to offer an allowance.
Remember that the same duty of care applies to private vehicles used for work as company provided vehicles and therefore any employer looking to move to
car allowance should ensure that they have correct policies and checks in place to ensure that these are met.
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How do UK businesses tend to approach reward currently? Is there a shift in approach and if so, what is causing this?14 August 2018
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Hear from our CEO Steven Van Hoorebeke during an interview with The Business Debate.18 April 2018
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As a Business Development Manager, I am often invited to most company events. Certainly anything client or prospect facing, and usually internal gatherings too. The SD Worx Business Kick Off 2018 was no different. Hosted in Manchester over the course of 2 days, we had a packed agenda and over a hundred colleagues in attendance, all ready to be WOW’ed.24 January 2018
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During Christmas and the associated holiday season, payroll managers experience some annual adjustments and events. Simon Parsons takes us through some of the festive benefits – and the associated tax implications.18 December 2017
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Nobody is safe, according to many scientists and technology gurus. Artificial Intelligence (AI) and robots will soon to be able to do almost everything better than humans and will take over most jobs, including that of a doctor, lawyer and other professionals. Our Managing Director, Doug Sawers, shares his thoughts...3 April 2017
HR Tech World Congress, the UK’s biggest annual HR technology show, took place at the ExCel in London last week with the theme of "The Future of Work". It was a fantastic two-day event attended by more than 3,500 exhibitors and delegates, with plenty of interesting speakers! Read our highlights from the event...30 March 2017
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Never before has it been more vital for businesses to optimise the ideas, strengths and skills of their entire workforce – and of others within their industry and beyond. Is it time for HR to become more proactive? Hear Doug's thoughts, MD of SD Wrox UK & Ireland, on HR and its role in the future of work.21 November 2016
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In today's world, "human capital management" seems to be the hot topic of choice. A complete HCM solution covers all the people related processes and data in an organisation, and by its very nature can get pretty full on and complicated to implement, with greater upheaval and cost involved. For that reason, it is not always appropriate for an organisation to consider changing all aspects of their HCM in one fell swoop.6 June 2016
Interview by FDE TV at HR Tech London 2016. David Woodward, our Chief Product & Marketing Officer, speaks with Darina Ivanova from FDE about HR and Payroll technologies, workforce optimisation and what it means to be "digital" from an enterprise level perspective.4 May 2016
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Our WFM System experts, describe how keeping the labour model simple and transparent could increases chances of user buy-in, whilst still generating an accurate labour forecast.15 February 2016
Welcome to the future! I am back with a new blog, this time I look at 6 technology predictions over the next 5 years that will impact the world of HR & Payroll. Who knows where we’ll be in 2020? My predictions are based on detailed research, analysis of past and current technology trends, and consumer purchasing behaviour.11 January 2016
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