Summary
Highlights
Three common mistakes trigger HMRC investigations: 1) Misunderstanding 'personal use': Commuting or even keeping a car at home counts as personal use. 2) Using a van like a car: Personal use of a company van leads to flat-rate BIK charges, with potential backdated tax and penalties. 3) Forgetting new EV penalties: Electric cars over £40,000 now face a £390 'expensive car supplement' for five years and a £190 annual road tax from April 2025.
The video outlines four strategies: 1) Choose low-emission cars with low P11D values (e.g., hybrids under £35k or EVs under £40k) to avoid new penalties and keep BIK low. 2) Utilize salary sacrifice for EVs, reducing income tax and national insurance while benefiting from the low 3% EV BIK rate. 3) Keep high-emission or expensive cars personal and claim mileage at HMRC-approved rates (45p/mile for first 10,000 miles, 25p thereafter) to dodge BIK. 4) Use a van if it suits the business, as their flat-rate, predictable, and low tax makes them highly efficient, especially electric vans.
UK directors and employees face increased tax on company cars from April 2025. Electric Vehicles (EVs) remain at a 3% benefit-in-kind (BIK) rate, while petrol and hybrid rates are rising. From April 2025, EVs over £40,000 will incur new charges, including a £390 penalty and a £190 annual charge. The video explains how company cars are taxed based on P11D value, CO2 emissions, fuel type, and the BIK rate.
The video provides examples for a 40% taxpayer in 2025/26. A petrol Nissan Qashqai (30,000 P11D, 142g CO2) results in a £4,080 annual tax bill. A hybrid Qashqai (34,000 P11D, 19g CO2) reduces the tax to £1,224 annually. A Tesla Model 3 EV (42,000 P11D, 0 emissions) incurs only £504 per year, proving EVs are still the most tax-efficient option despite new charges.
Vans operate under different HMRC rules. For 2025/26, the taxable benefit for a regular van is £3,960, leading to a £1,584 annual tax bill for a 40% taxpayer. A zero-emission electric van's taxable benefit is £720, resulting in just £288 annual tax. This makes electric vans a highly tax-efficient choice for businesses, provided they are genuinely used for commercial purposes and not personal use.