Tax advice of the week: Buy a van
Jan 29, 2010
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There "wasn't much to shout about" in Alistair Darling's Pre-Budget Report. But if you happen to be in the market for a new company van, both employers and employees could save themselves some money by going green, says Tax Tips & Advice.
Under current rules, "a director or employee who has the use of a company van for private mileage has to pay tax on a benefit-in-kind of £3,000 per year".
That equates to £600 for a basic-rate taxpayer. The employer also has to pay national insurance (NI) of £384 per year. But from 6 April, these charges will be reduced to nil for a five-year period if the van is electrically powered.
The best way to arrange this as an employer is to use a salary sacrifice scheme. A firm could offer a member of staff the use of a tax-free electric vehicle in exchange for a reduction in salary of, say, £300. That way the employee could save at least £600 a year in tax while only losing gross salary of £300. Their employer "saves £384 in NI and cuts the wages bill by £300".
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