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PBR09: National Insurance rates to rise

Date: 09 December 2009   |   Author: Martin Gurdon

Pre-Budget Report 2009

A top cash-for-car expert has predicted next year's rise in National Insurance contributions won't drive employees away from wholly-owned vehicles.

"It's not helpful, but it's not material," said Zenith Provecta managing director Andrew Cope of Government plans to hike National Insurance payments by 0.5p in the pound from April 2010 and another 0.5p in 2011.

Since Class 1 National Insurance is calculated taking into account a range of payments and benefits, including the use of company cars, raising it will make running a fleet vehicle more expensive for employees, but Cope, whose company specialises in opt-out schemes, thinks the additional costs will be small.

"For somebody paying 15% company car tax on a vehicle costing £18,000, the benefit in kind is about £30 (a year)," he said. "This is a fairly immaterial Budget for the car (sector). There's not a lot to write home about."

Cope suggested that for many employees traditional fleet vehicles had actually become cheaper, thanks to a mix of improved mechanical efficiency cutting fuel bills, and a big swing toward choosing lower emission vehicles which attracted less BIK tax. "Quite a lot of people are paying less than they did two years ago. The company car is coming back in a big way," he said.

Cope suggested some of the company-vehicle policies announced by the Chancellor, such as tax breaks for electric cars and vans over a five year period, were too short term to be effective, as virtually no vehicles of this type were readily available.

He called on the Government to launch long term tax policies to encourage carbon reduction. "If you thought you could take a third of your income tax by hugely improving your CO2, you'd do it," he said.

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