So here, we explain the tax on company motorbikes and the associated tax implications for an employer and employee.
Tax benefits of company motorbikes
Getting through the rush-hour traffic, cutting down on fuel costs or just a greater sense of fun and adventure; these may be some of the reasons that people opt to ride a motorbike. However, they are also a tax efficient option if you are choosing a company vehicle.
For an individual, choosing a company motorcycle will mean that the benefit in kind values are generally lower than if a company car had been chosen, and as such they will attract lower additional tax charges.
For a company, there is no higher tax limit on what can be claimed in the company’s tax calculation and all the cost of the motorbike qualifies for capital allowances. Also all the VAT may be reclaimed on the purchase of a company motorbike. However, it is worth noting that VAT will have to be charged on the motorbike when it is re-sold.
How does it affect me as an employee?
The employee is taxed as receiving a benefit in kind and will pay tax at their highest rate on the benefit in kind value.
The benefit in kind value of the motorbike is calculated as 20% of the total cost (including VAT) of the motorbike.
Tax on company motorbikes: An example
If a motorbike costs a total of £7,000, the benefit in kind to the employee will be £1,400 (£7,000 X 20%). This is apportioned where it is only available for part of a year but the tax charge continues to be payable for as long as the motorbike is made available. If the running costs (insurance, maintenance etc) of the motorbike are paid by the company there is an additional benefit in kind of 20% of these annual costs.
Therefore, if they are a higher rate taxpayer and have a new motorbike costing £7,000 the extra tax they would pay would be £560 per annum. (£7,000 X 20% X 40%).
How does it affect me as an employer?
The company would also pay 13.8% Employers National Insurance on this benefit amount as declared on the P11D(b) and this is payable by 22nd July after the end of the tax year.
Please also remember that the invoice must be in the company name, the motorbike should be under the company’s ownership (i.e. the log book in the company’s name) and you will need a business insurance policy.
As a final point, it is also worth noting that it is generally more tax efficient for an employee to use a personal motorbike and claim back business mileage from the company at the HMRC approved rates, currently 24p per mile as this way there is no benefit in kind charge. However, this will not be appropriate if the motorbike is predominately used for commuting. Please contact us if you are at all unsure.
Contact us
For bespoke advice on company motorcycles, or any other asset or benefit in kind, or to discuss our P11d service please contact our tax team today.
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