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Is a Company Car Still Considered a Good Benefit?

Ensure you consider all the options for delivering a car benefit.

Controlling costs is a common target for most businesses. Ensuring the company is meeting its objectives and keeping employees happy with an appealing benefit package is a difficult balance, but is it possible if you choose the right provider for your employee car benefits.

If you select the best solution for your company car entitled drivers, as well as for your non-entitled drivers, both you and your employees will be able to enjoy tax savings.

Company car tax explained

A traditional company car is classed as a taxable benefit, so both you and your employees will pay tax to provide and have access to that car. It’s a simple sum to calculate how much Benefit-in-Kind (BiK) tax is due.

For employers

For employees

Both of these calculations will provide an annual total of tax that would be payable.  

You can view the latest rates on the gov.uk website here.

How to make savings

Employee Car Ownership Schemes (ECOS) give you and your employees the benefits of a company car without the associated tax burden – increasing flexibility, improving controls and generating savings.

With ECOS, the ownership of the vehicle passes to the employee when the car is delivered. This means that BiK tax and Class 1A NICs are not applicable. You deduct a fixed amount from your employee’s net pay each month to contribute towards the running costs of the car.

Additional benefits of ECOS

Take advantage of low BiK on EVs

BiK rates on pure EVs is currently fixed at 2% until 2025. You can provide your employees with an easier route to market to drive an EV, by offering a Salary Sacrifice Car arrangement – this solution would work for both company car entitled and non-entitled drivers.

Salary Sacrifice Cars allow your employee to give up some gross pay in return for a brand new EV. With the taxable salary amount reduced, your employees will make savings on income tax and NICs, and your business will save on NICs too. However, BiK tax will be applicable for your entitled drivers, as the vehicle will be classed as a company car.

Choose a provider which can offer all solutions

There isn’t a one size fits all when it comes to providing employee car benefits. We’ll help you determine the best set-up for your business with our full solution management that is included as standard for all our employee car benefit solutions.

Get in touch today to ensure you’re delivering a car benefit to your employees in the most efficient way for your business.