Current Situation
We have 3 cars.
My wife drives a Diesel CR-V. This doubles up as our general family car and if nobody is home, I'll take it to work so that I can take the dog with me.
SC430 - this is my 'daily'. My wife will drive it if I need to use the CR-V.
My wife would 'like' a new car. I have no objection to this because I hate driving the CR-V (It's a very capable family car though).
Now the calculations get messy. Need the best deal for me & the business.
I have a Ltd Co. I’m a director.
I currently claim 45ppm for business mileage. Approx 6000 miles/year. (I have mixed results turning up at business meetings in various Cars. The CR-V? mostly no comment. The SC? – They think they are paying me too much! The Soarer? I should buy something that’s not old and unreliable). Very occasionally, a fellow enthusiast who appreciates them. A new very average car probably wouldn’t hurt for image (to others).
Choices? This week the offers seem good on a V40 (last week it was an A3, next week who knows, maybe a golf – but the figures will be similar and it’s that size hatch we will be looking for)
I’m looking at 3+23 costs 10k miles/year. Average £160 plus VAT month.
Question #1 – I pay tax at 20% (just) – a cash allowance would put me into 40% - would a car option still just be 20%?
BIK over two years on the Volvo above would be £2200 @ 20%
Help would be appreciated. I’ll ask more as I go, but If I’ve missed anything vital, let me know.
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Not sure you should worry too much what your clients think of your car. It maybe used to matter but I'm not convinced it does so much now. People, especially the younger generation, just aren't as conscious of them.
I've turned up for important meetings in my boss's Panamera, my E class, a shonky old Mondeo, my wife's Qashqai, her old Ka, hired Pandas, in a Westfield and even on the bus.
Nor aware that any of those modes of transport made any difference to the outcomes of the meetings. It's what you have to say when you get there that generally influences that in my view.
But you'd never go wrong with a Golf. Totally classless car isn't it? In the nicest way I mean.
;-)
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>> I've turned up for important meetings in my boss's Panamera, my E class, a shonky
>> old Mondeo, my wife's Qashqai, her old Ka, hired Pandas, in a Westfield and even
>> on the bus.
>>
>> Nor aware that any of those modes of transport made any difference to the outcomes
>> of the meetings. It's what you have to say when you get there that generally
>> influences that in my view.
Also my experience. Completely agree.
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BIK relates only to a company supplied car doesn't it? If so, advice from different angles which I always followed when director of my own company was to not even consider having a car provided and directly financed by my company. I'd have to research again to remember the reasons but it seemed to me a strong argument.
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Is it company or private.
Lease charge for business Vs Private Lease
Is your company VAT Reg? Full or one where fixed % repayment instead of actual VAT out payments?
Sit down & do arithmetic of Private Vs Company car - Mileage rates, BIK, VAT, cheaper business lease than Private? Hybrid or petrol or diesel?
A son has own company - VAT Reg & uses own car & charges his company 45p for maybe 5/6,000 company miles. Would be cheaper to have a company Hybrid car & pay private use petrol BUT runs a new M3 which has massive BIK costs.
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>> Is it company or private.
>>
Is what?
>> Lease charge for business Vs Private Lease
>>
Everything I've looked at just add the VAT for private lease
>> Is your company VAT Reg? Full or one where fixed % repayment instead of actual
>> VAT out payments?
>>
VAT Registered - Yes. Standard
>> Sit down & do arithmetic of Private Vs Company car - Mileage rates, BIK, VAT,
>> cheaper business lease than Private? Hybrid or petrol or diesel?
>>
Trying.
Can anyone answer the BIK tax rate when I'm on the Cusp of paying 40% tax. If I took a cash allowance it would be taxed at 40% - but if I took the car, would the benefit valu then also see it taxed at 40% Or am I just classed as 20% for the BiK?
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>> >> Is it company or private.
>> >>
>>
>> Is what?
I assume he means is the car to be a company car or a private one?
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Ahh...
It would replace the CR-V as our general family car and I'd also use it for business travel
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So who would own it, you or the company?
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That's what I'm trying to decide.
Do I buy it with the company and my company pays the lease / insurance etc or do I just buy it myself and continue to claim 45p a mile for any company use
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Right sorry, I'm no help at all. Company cars are a mystery to me, never had one and never likely to. But I do like seeing what car people end up with.
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At your sort of business mileage, it's probably not worth putting the car through the business as your "company" car as it may well tip you into the higher rate tax band.
Probably best to get whatever you want privately and charge a business mileage rate to your company when it's being used for that. Bit out of touch with the current rates but it used to be acceptable to charge 40p a mile for up to 10,000 business miles in a tax year and 25p a mile thereafter. Those rates may well have changed but for easy counting on your 6000 business miles a year you could claim £2400 and that would not incur any personal tax.
You'd have to keep a log of your business trips though in case HMRC wanted proof of them at any time.
The other useful thing about doing it that way would be that you could use whatever car you choose at whatever time. The mileage charge could be applied to any of them.
Edit - sorry, you know all this !
Last edited by: Runfer D'Hills on Tue 17 Jan 17 at 13:22
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ToCoMo, if you provide the car via your company then the BIK will reduce your tax free allowance by the BIK value. As you probably know this is based on the list price of the car and emissions.
So let's say the Audi A3 was a 2.0TDi 150 StopStart SE which has a base list price of £23,000 and emissions of 108g/km. This will mean you have a BIK figure calculated at 21% therefore £4830. You have a tax free allowance that is £4830 and if you are on the cusp of paying 40% this will pull you into the 40% bracket by £4830 (ish).
Therefore in terms of BIK you will pay £1932pa or £161/month extra in tax.
If you opt for say a 1.2TSI then the figure would be lower because it's a cheaper car and there is no 3% charge for being a diesel. So for a 1.2TFSi 110 StopStart SE list price is £19180 and emissions of 114g/km makes it taxable at 17%. Making it £3260pa BIK or £1304pa extra in tax at 40%.
Last edited by: rtj70 on Tue 17 Jan 17 at 13:47
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Thanks rtj
>> if you are on the cusp of paying 40% this will pull you
>> into the 40% bracket by £4830 (ish).
This is the answer I think I needed.
Probably makes a lot more sense just to buy the car privately and continue claiming the 45ppm
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It's a little different here I think as 'you' are both the company and the employee - so you are fronting the costs either way. You will need to calculate all the costs to see which is most cost effective.
Company owns the car:
Co will foot the lease / maintenance bill, which will be tax deductible, and VAT free reducing the tax paid. Co profits will go down which will reduce tax bill. May reduce your income (depending on how you are set up) and therefore your personal tax bill. However, you will be liable for the co car tax, thus increasing your personal tax.
You own the car:
You foot the lease / maintenance bill - out of taxed income; and will have to pay the VAT. Co pays you 45ppm - out of which you have to pay the fuel (inc the VAT - although maybe the Co can recover the VAT on this, not sure) - so the co profits go down, with related reduction in Co tax, and possibly your income.
Head spin!! It will depend on exact costings and how your Co is set up as to which is the more tax efficient (which is what you are aiming at, given that at the end of the day you are footing the bill one way or another!).
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Yes Richard, not exactly clear cut. Somehow it just feels like I'll be paying for the car twice if I go for the company owned car!
Co Car - Reducing company profits will reduce my Corp tax bill and not affect (effect? shout out for the resident pedants please :) ) much else.
I think I can only reclaim half the VAT element of the lease cost?
Personal Car - yes the company can reclaim something like 2.5ppm of the 45p by way of a VAT reclaim (maybe a bit more because it's a 4.3l V8 i'm using :)
Head spin indeed!
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>>Co will foot the lease / maintenance bill, which will be tax deductible, and VAT free reducing the tax paid.
Outright purchase company cannot claim VAT back on purchase price.
Leased the company car can claim 50% vat
Pickup trucks - company can often claim VAT on purchase but has to charge VAT on the sale!
ALL BIK costs are on Maker's website - also HJ site has lots of info on BIK
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Cant remember the exact numbers, but I did work this same scenario out for Mrs B and her Ltd company.
From memory it was far more advantageous to just claim the 45p for her 9K a year. I guess if your mileage is higher i.e. over 10K when the rate drops to 25p then the situation may be different
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I'm in a very similar position work wise but am doing 10,000 miles a year. I bought a Volvo V40 on lease for 4 years (1+47) 10k miles a year £240 a month inc VAT T2 R Design. £200 for the extra year warranty, £300 for 3 services, both up front. I bought myself and charge back the 45p, which is an expense and tax free of course. Works out that I will make a small "profit" that way which pays the personal use. Excellent car, doing 40 MPG which is less than I hoped but that and poor visibility around the rear "hump" are the only complaints. Brilliant cabin ambience at this time of year in the dark, head lights are stunning, the interior is great. I am 6'4 and the driving position and seat comfort is the best of any car I have driven. I owned an A3 in 2010 but this time around my criteria was "nothing German"..... The image of the Volvo is more neutral than a BMW but around here every third car is German and it just feels like running with the herd..
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If you get an allowance, it is likely that the company will only pay you the Approved Mileage Allowance Rates, e.g. a 1.7 diesel would get 11 pence per mile.
You may be able to claim the difference back from HMRC between the 45ppm and the 11ppm example for the first 10,000 miles and the difference between 25ppm and the example 11ppm for miles 10,001 miles and over. Of course the refund will be at your tax rate so mileage x (rate - AMAP) x tax rate percentage.
I am opting out. My allowance is £6,000 but I do 25,000 miles a year so it is borderline. My employers lease company seems expensive and has a limited choice with hefty trade up fees so I can get a car on lease for my allowance with insurance and maintenance and hopefully pocket most of the full rate less AMAP.
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Cash or Car - Help - Runfer D'Hills
