The latest figures from HMRC – admittedly for 2012/13 – show that there were 940,000 company cars on the UK’s roads. Their taxation is one of the more curious aspects of Budget announcements. Chancellors of both hues have tended to announce changes (aka increases) in their Budgets that do not take effect for several years (IFA Clifton).
For example, in the March Budget Mr Osborne revealed consultation plans for 2021/22 and beyond – after the next election.
Delay and Forget
The delayed implementation may be a ploy, on the basis that it will be long forgotten by the time it arrives as a tax code adjustment. Nevertheless, the net effect is still for tax increases on a year-by-year basis. The latest round of changes, which were finalised in the 2013 Budget, have added 2% to the ‘scale benefit’ for most cars. For instance, the scale benefit on a BMW 320d has risen from 19% to 21%, equivalent to an increase of more than a tenth in the tax payable. In the case of the BMW, as with other diesels, the benefit had been due to fall for 2016/17 because the original intention was to scrap the 3% diesel supplement. However, in the wake of the VW defeat device scandal (and the Treasury’s constant need for more income), the Chancellor decided that the 3% levy would remain.
More Next Year
In 2017/18 another 2% will again be added to most scale benefit numbers, although as now the ceiling will remain at 37% for the highest emission vehicles. 2018/19 will see the same hike again, taking that BMW 320d’s scale benefit up to 25%.
If you are entitled to a company car, the ever-increasing tax scales may mean you would be better off taking more pay or other benefits as an alternative. Certainly, if your employer provides “free fuel” you should look very carefully at whether that is worthwhile: the tax on this perk has gone up, even as pump prices have been dropping.
Talk to us about your options: a company car is just another aspect of remuneration and you may be surprised how much you could save by tweaking your overall pay package.
THE PENALTY SPOT
Fancy paying a fine of £23,000?
Bar £100, that is what it cost Swindon Town Football Club in fines from the Pensions Regulator (TPR) for persistently ignoring the club’s responsibilities as an employer under the automatic enrolment pension provisions. Swindon managed to score quite a crop of own goals, but it is not alone in attracting TPR’s attention.
According to the latest quarterly statistics from the regulator in the first quarter of 2016:
- Over 3,000 compliance notices were issued, bringing the total since October 2012 to nearly 8,000;
- 806 £400 fixed penalty notices were issued; and
- 96 escalating penalty notices were issued. These can be up to £10,000 per day.
As had been widely expected, the smooth roll out of automatic enrolment by large and medium-sized employers has become a lot bumpier as small and micro-employers have reached their ‘staging dates’. The sheer number of employers involved meant an increase in penalties was inevitable, but the jump suggests that there are deeper problems.
If your business has yet to enter the automatic enrolment process, take the advice of the Pensions Regulator: “Employers should not ignore their duties”.
For help in dealing with your business’s automatic enrolment requirements, please talk to us as soon as possible.
Past performance is not a reliable guide to the future. The value of investments and the income from them can go down as well as up. The value of tax reliefs depends upon individual circumstances and tax rules may change. The FCA does not regulate tax advice. This newsletter is provided strictly for general consideration only and is based on our understanding of law and HM Revenue & Customs practice as at June 2016 and the contents of the Finance (No. 2) Bill 2016. No action must be taken or refrained from based on its contents alone. Accordingly, no responsibility can be assumed for any loss occasioned in connection with the content hereof and any such action or inaction. Professional advice is necessary for every case.
IFA Clifton And Financial Advice Bristol
If you would like to speak with one of our Independent Financial Advisors and potentially receive financial advice, please contact us on 0117 923 7652. We are based in Clifton, Bristol but we are happy to service clients from across the UK and we provide free initial meetings at our client’s convenience.
Churchill Wealth Management Limited is located at 13 Alma Vale Rd, Bristol BS8 2HL, United Kingdom.
About Us: Churchill Wealth Management is a team of independent financial advisors/financial advisers (IFAs) based in Clifton, Bristol. We provide independent financial advice, including pension advice, investment advice, inheritance tax planning and protection/insurance advice.