There are changes to the rates on other vehicles too and generally, anything with CO2 emissions under 64g/km will see a small saving from this year.

But be aware of what this can rise as a worst-case scenario: a car that costs £30,000 could have a rate of up to 37% applied, resulting in a taxable value of £11,100.

If you are a basic rate taxpayer (in 2020/21 that’s income up to £50,000) the tax is then calculated at 20% of that taxable value.

 

Therefore, for a year the cost would be £2220

The employer also then pays National Insurance for the benefit provided to the employee.

 

Using the taxable value from the example above multiplied by the National Insurance rate of 13.8%. Therefore a charge of £1531.80 (£11,100 x 13.8%)

Should I buy or lease?
Since April 2018 there have been tax reliefs available for low emission (under 50g/km) cars if you do buy. A low-emissions car is eligible for a 100% first-year allowance, which means the full cost of the vehicle is allowed to reduce the taxable profits of your business.

 

With that same £30,000 car from above, you would save £5,700 in Corporation Tax.

 

However, if you don’t want to use a significant chunk of cash on a car, you could also lease the car and offset the lease payments against your profits.