how do company cars work?

Question

what costs are incurred for
A. The Employer and B. the Employee?
and whats the 22% and 44% all about?

Thanks

Answer 1

In the old days of the previous Labour Government Tax, direct marginal Income Tax rates for higher paid reached 90% ....

Needless to say, Companies found other ways to reward their staff - and thus was born the Company Car.

Essentially there are two types of company car = 'needs' and 'perks'. 'Needs' means for example, Service Engineer, Salesman, Delivery Van etc. i.e. 'cars' that are part of your job but that you are allowed to take home at the weekends for private use.

For the Employer it's a way to reward staff that costs less than paying them more money.

For Employee it's an extra Benefit that costs less in Tax than being paid the money and then buying, maintaining, insuring etc their own car.

I've no idea what the percentages relate to, however Employees have to pay Tax on the 'equivalent cost' of the car since it is classified as a Benefit in Kind - 'Perks' are Taxed on a different scale to 'Needs' (so maybe that's where the % come in)

Answer 2

turn the key and off they go!