Fleet News

Company car drivers set to lose benefits

THOUSANDS of company car drivers with children are in danger of losing state benefits worth hundreds of pounds a year.

Families with above average incomes could lose up to £1,300 in potential benefits from next April, under the new Child Tax Credit (CTC) scheme. Child benefit is means-tested and paid to parents according to their incomes. For the first time the benefit charge of a company car will be included in the assessment of household earnings which determines how much cash families receive.

From April 2003, CTC guarantees £26.50 a week, or £1,378 a year, for all parents with a joint income of up to £50,000.

The scheme is a major change from the current Working Families Tax Credit scheme, in which to qualify only one parent has to earn an income of less than £50,000, not including company car benefit or cash in lieu.

Under the new scheme, if the 'benefit' value of a company car (or opt-out cash for car allowance) theoretically raises parental income above £50,000, then the parents' CTC payments will be reduced on a sharply sliding scale. For example, a household where both partners work and earn a combined income of just below £50,000, but where one of the partners had a £15,000 company car with a benefit value of £2,250 on which he pays £900 tax, could lose virtually all of the CTC benefit.

Fleet Support Group financial services director Roger Ashman has highlighted this cash drain on company car driving families, and said millions of parents could be affected.

Ashman said: 'What Chancellor of the Exchequer Gordon Brown did not spell out in the Budget statement was that taxable 'benefits' were to become 'income'.

'Millions of parents risk losing part of their CTC if they have a company car or cash in lieu of a company car.

'By stealth, work drivers who are already highly taxed are to be victimised by still more tax. Furthermore, an increase in National Insurance Contributions in 2003 will turn the screw ever harder.'

  • What do you think? E-mail fleetnews@emap.com
  • Leave a comment for your chance to win £20 of John Lewis vouchers.

    Every issue of Fleet News the editor picks his favourite comment from the past two weeks – get involved for your chance to appear in print and win!

    Login to comment

    Comments

    No comments have been made yet.

    Compare costs of your company cars

    Looking to acquire new vehicles? Check how much they'll cost to run with our Car Running Cost calculator.

    What is your BIK car tax liability?

    The Fleet News car tax calculator lets you work out tax costs for both employer and employee