posted 2 years ago

Company Car Drivers Could Pay National Insurance On Benefits

Report Calls For Overhaul Of Tax System

The Office of Tax Simplification has suggested that employees should pay National Insurance Contributions on company cars and private fuel benefits, Fleet News has reported. The Office has, therefore, called for further research to consider the advantages and disadvantages of applying Class 1 Contributions to all employee remuneration – whether cash or benefits – as part of a review of the tax and National Insurance systems in the United Kingdom. As things stand, benefits tend to be subject to Class 1A National Insurance Contributions which come from employers and is paid at 13.8% after the year end. This could be merged with Class 1 Contributions as paid by employers and employees. An alternative - the Office of Tax Simplification has said - is “to abolish Class 1 and Class 1A on employee benefits” and replace them with an “employer tax on cash and benefits which applies consistently”. The Australian Fringe Benefits Tax could provide the model. If there is a significant change – and this would take some time to implement – any initiative might reduce the popularity of Salary Sacrifice Schemes (depending on the specifics). These encourage employees to give-up part of their salary for benefits such as a company car. This minimises cash income which reduces tax liability.

Review Of Employee Benefits and Expenses Report Findings

The Office of Tax Simplification – which has published a report titled Review of Employee Benefits and Expenses – proposes to further explore the case: “for applying Class 1 National Insurance Contributions to all employee remuneration (whether cash or benefits in kind)”. The report adds: “At the moment, having a separate Class 1A is seen by many people as distorting, unfair, and administratively complex” and that “it is questionable whether different treatments of types of reward by the tax system is appropriate”. The report, however, claims that: “a change would have an impact on the amount of National Insurance Contributions some employees pay” and this could increase Government revenue from this source. As such: “work needs to be done on determining the real impact on employees and how the basis for compensating adjustments could be made”. Options include reducing National Insurance Rates. Furthermore, the report stresses that its contributors: “liaised closely with HM Treasury and HMRC to discuss if what we are proposing is politically, financially and operationally feasible” - and that they will: “continue to liaise” with these bodies to see how the recommendations have progressed”.


As an ex-company car driver now funding my own private car I would say company car drivers are generally speaking already fully taxed. If NI is added it would be necessary to reduce the car benefit tax to prevent drivers being overtaxed. This would benefit employers who would have their liability to NI reduced. The Treasury wouldn't stand for that so employers NI rate would be increased. Much simpler to forget it and just leave things as they are.

So what about all those self employed with their cars and vans that they are fuelling and claiming to be using solely for business but swan about all weekends in and holidays, claiming as business expenses and therefore not paying tax on that money.

I rest my case Mr Temple. Do the sums and bin the company car, be prepared to drive something a little older. If you think you are taxed up to hilt now, check out the next hit with the changes coming in April, never mind the proposed National Insurance tax too.

Utter rubbish, I have a company car and a perk it is not, taxed to the hilt and a tracker to distinguish between private fuel and company fuel. I also do 30k a year so to opt out isn't an option !! Did I get a pay rise each year the tax benefit increased ????

The Labour Government under Gordon Brown and Tony Blair killed the benefit of having a company car. The coalition government have not faired any better. As an ex company car driver I was prepared to pay a reasonable extra level of income tax, but to be honest, the politicians killed the goose that laid the golden egg. It sounds like they intend to try and kill it for a second time after it is already dead. I got out of a company car 6 years ago, granted I cannot afford a brand new motor every 3 years, but don't have the taxman round my neck and although I run an older car, I am happy as I am in control rather than the tax man.

good at last the biggest fiddle going is finally being acknowledged.Why has this not happened sooner.Tax the spouses as well that swan around at weekend on someone elses fuel.

Even if this gets implemented - which it probably won't - it will only go some way towards equalising the cost of buying and running a car that private individuals incur - and they too can only drive them at evenings and weekends.

Utter Load of Rubbish, tax the Suits in Downing Street for the benefit of being driven around london in a 150K Jaguar XJ Sentinels. Paid for by the hard working lot called voters... its sickening

why do we pay car tax on a car we can only use privately at weekends and limited evening use let alone national insurance