The age of 'perks of the job' has long since disappeared. There is light at the end of the tunnel as fare as the recent financial crisis is concerned. However we as employees may never fully recover from the long term effects of the recession. In order to overturn a huge deficit, the UK Government lowered taxes and offered fantastic incentives to those with money to spare in order to stimulate the economy. With an economy on the move again, taxes are raised in order to bring money back into the hands of the government.
There is nothing new about this process of course. Economists and historians will gladly point out that this type of event is cyclical and affects markets all over the world. What we, the general public, have to ensure is that as the Government tightens it's belt where financial matters are concerned, we do the same.
The provision of a company car is in the decline in the UK, however there are still nearly 1 million in use today. Given the choice, most people will still choose to have a company car where one is offered. For a reasonable price, we get get to live a little beyond our means. After the last few years of hardship, I would agree in saying that we deserve it.
One area where employees and businesses can cut their tax bill is in the provision of fuel for the company car driver. Many cars, particularly those provided to more senior or higher earning staff members will be fully expensed. The company decide that the value of the employee is worth more than the cost of the fuel they are provided with for personal use. To paraphrase Benjamin Franklin, there are only two certainties in life, death and taxes. In 2014, you can be sure that where there is a benefit, the recipient will be beaten to death by the tax placed on it.
As an employee with a company car, you have two choices, either your boss pays for all of your fuel and you pay a fuel benefit tax, or you make sure that all the private mileage is paid for by yourself and avoid the tax. With an average private mileage of 6,000 miles per annum and falling fuel prices, many drivers are needlessly paying more in tax than the fuel would actually cost them. Many higher rate earners would need to cover in excess of 20,000 private miles before the cost of the fuel would exceed the tax they are paying.
See how much you can save with this handy calculator.
Let's not forget your boss either! Just for an employee accepting a fuel benefit, the company must now pay taxes in the form of a Road Fuel Scale Charge and National Insurance against the value of the benefit. Even for the cheapest and most economical car, these taxes will exceed £1,000. This is before the company end up paying for the private element of the fuel too!
To put into perspective just how much tax the Government actually reclaim for a fuel benefit, a higher rate tax payer driving 10,000 private miles per year will use £1,000 of fuel during these private journeys. If the employee pays for the fuel it will cost £1,000. If the company pay for the fuel and apply the fuel benefit charge, the fuel still costs £1,000. However between the employee and the business, an additional £4,000 will be paid out in tax.