Reduce Tax
How to reduce your company car tax bill
There are a number of things you can try and most of them involve swapping your car, which may have to wait until it is due to be replaced.
1. Go for a car with a cheaper list price.
2. Go for a car with a lower tax band percentage (according to CO2 emissions.)
3. If you pay 40% income tax, take a pay cut so you pay 22%.
4. Move to Monaco!
The last two may not be feasible, of course. Choosing a car with a cheaper list price is pretty straightforward and need not be a sacrifice: new car prices have fallen by an average of about 12% in the last 3 years and yet the standards of new cars have risen in almost every respect.
Remember that any optional extras you order will increase your tax bill, so buying a basic-spec car and then fitting it with 1000s of accessories can be a false economy.
A lower tax band percentage demands a little more care. On two cars of the same price, the one with the lower tax band will be the most tax-efficient. However, don’t confuse tax band with the CO2 figure, as discounts or surcharges may apply, see here for details.
You should also keep an eye on list price. To give you an idea, a 20,000 car with a 30% tax band will cost the same as a 30,000 car with 20% tax band. So while an alternative-fuelled car, such as CNG, bi-fuel or petrol/electric hybrid will mean a low tax band, they tend to have higher than normal list prices.
In some cases, it may be more tax-efficient than the conventional cars on your shortlist; in others, less tax-efficient. It depends on the shortlist, so use a reliable company car tax calculator to compare.