As most drivers of a company car will be aware, if you have any private use of the vehicle this will result in a significant Income Tax charge. The benefit charge is the way that HMRC levy tax on this benefit in kind; and the higher the CO2 footprint of your company car, the higher the Income Tax charge.
Which is why many company car drivers are now looking at electric vehicles - either plug-ins or self-charging hybrids - as a tax efficient alternative.
For example, if you presently drive a gas-guzzling petrol driven car with a CO2 rating of 145g/km you could drastically reduce your benefit in kind tax charge by switching to a hybrid or fully electric car with a CO2 rating as low as 0g/km. There would still be a tax charge, even at 0g/km, but it would be based on a minimum 1% of the list price of the car when new, rather than 33% if rated at 145g/km.
Company car drivers whose private fuel is paid for by their employer will pay an additional Income Tax charge based on the Car Fuel Benefit charge. This charge is calculated by applying the above percentage rate (33% in our example above) to a fixed figure, £24,600 for 2021-22. Accordingly, the Car Fuel Benefit charge added to the driver’s taxable income would be £8,118.
Interestingly, since 6 April 2018, there is no taxable car fuel benefit where electricity is provided for an electric car. Legislation was included in the Finance Act 2019 with retrospective effect where the recharge facilities are made available to all employees at the workplace.
If an employee recharges a company vehicle at home and is then reimbursed for the cost of the electricity used, this may be challenged as earnings. However, the employee could then make a claim for the electric cost using the advisory rates. Currently this is 4p per mile for fully electric cars.
A final point, employers would also benefit from a shift to an all-electric company car fleet. They are obliged to pay a 13.8% National Insurance charge on the total value of benefits provided (car and car fuel benefits); in which case converting to electric would be an additional bonus.
In a recent news story published on the GOV.UK website, HMRC confirmed that nearly 1.8 million married couples and those in civil partnerships are claiming the Marriage Allowance to save up to £252 a year in Income Tax.
The allowance enables married couples or those in civil partnerships to share their personal tax allowances if one partner earns an income under their Personal Allowance threshold of £12,570 and the other is a basic rate taxpayer.
They can transfer 10% of their tax-free allowance to their partner, which is £1,260 in the 2021-22 tax year. It means couples can reduce the tax they pay by up to £252 a year. Couples can also backdate their claims for any of the four previous tax years, which could be worth up to £1,220.
Almost three million people have moved off the furlough scheme since March as the economy began to bounce back and businesses reopened, according to new statistics.
This is unsurprising as employers are now expected to cover 20% of any hours not worked with government providing 60%.
It will be sobering to see how the final closing of the furlough scheme on 30 September will affect unemployment rates.
Readers who are still undecided how to respond to these changes will need to make possibly agonising decisions in the coming month.
If you do not pay your tax bill on time and cannot make an alternative arrangement to pay, HMRC can take ‘enforcement action’ to recover any tax you owe.
You can usually avoid enforcement action by contacting HMRC as soon as you know you have missed a tax payment or cannot pay on time.
They may agree to let you pay what you owe in instalments, or give you more time to pay.
Otherwise, there are a number of enforcement actions HMRC can take to get the tax you owe. They can:
1 September 2021 - Due date for Corporation Tax due for the year ended 30 November 2020.
19 September 2021 - PAYE and NIC deductions due for month ended 5 September 2021. (If you pay your tax electronically the due date is 22 September 2021)
19 September 2021 - Filing deadline for the CIS300 monthly return for the month ended 5 September 2021.
19 September 2021 - CIS tax deducted for the month ended 5 September 2021 is payable by today.
1 October 2021 - Due date for Corporation Tax due for the year ended 31 December 2020.
19 October 2021 - PAYE and NIC deductions due for month ended 5 October 2021. (If you pay your tax electronically the due date is 22 October 2021.)
19 October 2021 - Filing deadline for the CIS300 monthly return for the month ended 5 October 2021.
19 October 2021 - CIS tax deducted for the month ended 5 October 2021 is payable by today.
31 October 2021 - Latest date you can file a paper version of your 2021 self-assessment tax return.