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Business car leasing & the new corporation tax

The government is introducing new tax rules to encourage businesses to choose vehicles with lower CO2 emissions.

From 1st April 2013, 130g/km becomes a key CO2 emissions figure for new cars, replacing the previous 160g/km threshold. 

What impact does this have on the cost of leasing a business car?

For new cars registered from 1 April 2009, companies will be able to offset 100% of their leasing payments against their tax bill if the vehicle is below the 160g/km threshold, irrespective of its capital cost. For leased cars emitting more than this threshold, they will only be able to claim 85% of the financial element of the rental.

From 1 April 2013, the new rules will make it more tax efficient than before to lease a new company car that emits 130g/km of CO2 or less.

The tax changes will also relieve a major administrative burden from accounting departments, who now only have to worry about whether a vehicle has emissions above or below the threshold to work out their writing down allowance or lease rental restriction.

What should you do?

Whether you run one vehicle or a thousand, you need to review your business car strategy to ensure that you take full advantage of the new tax regime when it arrives on 1 April.

Firstly, you need to review your acquisition method. Currently there is a 'tipping point' of around £20,000, with most tax advisers recommending companies to buy cars costing more than this figure. Under the new system, leasing is expected to be the most tax efficient acquisition method in nearly all cases.

Secondly, companies need to review their car policy, examining the whole-life cost of vehicles. For example, two £30,000 cars may cost the same to lease or purchase, but, depending on emissions, could have a dramatically different after-tax cost.

Top tip - The new rules will affect leasing companies because it will take them longer to claim the tax writing down allowances.  This may increase leasing rates on cars with CO2 above 160g/km - so take advantage now of deals for cars registered before 31 March.

Need more help?

We're a friendly and helpful leasing company - We take the time to find you the best leasing deals that are right for you.  Why not contact us for advice on 0845 052 5268 or ask for a leasing quote

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