Company cars and being self employed
Discussion
Hi folks. I was wondering where I stand in terms of putting a purchase of a car through my business. I am looking to be completely legit here and just after some advice. The car would only be used (as it stands) to get me to and from the train station so not to my actual place of work.
As such can I put a car through as a business expense? We have a second car that is not used for any aspect of work travel if that makes any difference.
Stuart
As such can I put a car through as a business expense? We have a second car that is not used for any aspect of work travel if that makes any difference.
Stuart
stuno1 said:
Hi folks. I was wondering where I stand in terms of putting a purchase of a car through my business. I am looking to be completely legit here and just after some advice. The car would only be used (as it stands) to get me to and from the train station so not to my actual place of work.
As such can I put a car through as a business expense? We have a second car that is not used for any aspect of work travel if that makes any difference.
Stuart
Could you lease something through the business?As such can I put a car through as a business expense? We have a second car that is not used for any aspect of work travel if that makes any difference.
Stuart
If you are self employed the car will be yours and you can claim expenses and business use against tax. Any travelling to work,including travelling to see a client where the journey starts from home, is not completely tax allowable,I think the revenue have a nominal amount of miles before business use starts.Travelling to work is private mileage.
You can give yourself a company car and let the business pick up the tab for it.
You will be liable for the Benefit in Kind charges, this needn't be expensive, depending on what you get.
I would recommend that you pay for your own fuel and claim it back at the standard fuel rates (they're currently 11 pence per mile for a 2.0 diesel, 13 pence per mile for a similar sized petrol, not sure about smaller engines). If you don't, and you let the company pay for all your fuel, you will pay BIK on a fixed figure, and it doesn't work out cost effective unless you do a large amount of private miles.
I did the calculations for our business when we first got company cars back in 2012, and again last year when we swapped them. The cost to the business was not really any different compared to paying us 45 pence (or 25 pence) per mile for 15-20K miles per year, and we got brand new cars, with the reliability/warranty that goes with it. The personal cost wasn't much different either, other than we hadn't got £5k tied up in a car.
If you're only doing business miles, the BIK may not apply, but commuting doesn't count, so just using it to get to the station is a non-starter.
Obviously all the above depends on what car you get. An M5 will cost you a fortune in every respect, a 1.4 Polo will be dirt cheap. The hybrid options are very cost effective for business users, and remarkably pleasant to use for everyday purposes.
You will be liable for the Benefit in Kind charges, this needn't be expensive, depending on what you get.
I would recommend that you pay for your own fuel and claim it back at the standard fuel rates (they're currently 11 pence per mile for a 2.0 diesel, 13 pence per mile for a similar sized petrol, not sure about smaller engines). If you don't, and you let the company pay for all your fuel, you will pay BIK on a fixed figure, and it doesn't work out cost effective unless you do a large amount of private miles.
I did the calculations for our business when we first got company cars back in 2012, and again last year when we swapped them. The cost to the business was not really any different compared to paying us 45 pence (or 25 pence) per mile for 15-20K miles per year, and we got brand new cars, with the reliability/warranty that goes with it. The personal cost wasn't much different either, other than we hadn't got £5k tied up in a car.
If you're only doing business miles, the BIK may not apply, but commuting doesn't count, so just using it to get to the station is a non-starter.
Obviously all the above depends on what car you get. An M5 will cost you a fortune in every respect, a 1.4 Polo will be dirt cheap. The hybrid options are very cost effective for business users, and remarkably pleasant to use for everyday purposes.
First thing - you are NOT self employed.
You are a director of a limited company.
That is a very different legal position.
Therefore, if your company supplies you with a car (it doesn't matter whether the car is owned, leased, rented, on HP etc etc), you, as a director of the company, will be taxed under the PAYE system based on the Benefit in Kind amounts that relate to that specific vehicle.
You are a director of a limited company.
That is a very different legal position.
Therefore, if your company supplies you with a car (it doesn't matter whether the car is owned, leased, rented, on HP etc etc), you, as a director of the company, will be taxed under the PAYE system based on the Benefit in Kind amounts that relate to that specific vehicle.
Not necessarily, the OP needs to do his own sums.
If he wants something 'fun' and interesting, then yes, I'd agree, but if it's just a car to run around in, then it doesn't have to cost much at all.
For example, the BIK amount I pay, as a lower rate taxpayer admittedly, is around £30 ish per month. There's no way I can fund a car for this.
Ok, I could pay myself bigger dividends to the tune of the £260 ish plus VAT (half reclaimed, call it £300 all in) that the company spends each month, but then I'd probably be in the 40% tax bracket, so would lose out in other ways.
Each person's circumstances and requirements are different, I would recommend the OP gets a spreadsheet going and works it out for himself. If he's doing low miles, he could potentially get something reasonable for well under £200 per month, without a huge BIK penalty to pay either.
My calculations were that there wasn't a lot in it, but that the company got to pick up the tab for insurance and maintenance, so we were better off from a personal perspective.
If he wants something 'fun' and interesting, then yes, I'd agree, but if it's just a car to run around in, then it doesn't have to cost much at all.
For example, the BIK amount I pay, as a lower rate taxpayer admittedly, is around £30 ish per month. There's no way I can fund a car for this.
Ok, I could pay myself bigger dividends to the tune of the £260 ish plus VAT (half reclaimed, call it £300 all in) that the company spends each month, but then I'd probably be in the 40% tax bracket, so would lose out in other ways.
Each person's circumstances and requirements are different, I would recommend the OP gets a spreadsheet going and works it out for himself. If he's doing low miles, he could potentially get something reasonable for well under £200 per month, without a huge BIK penalty to pay either.
My calculations were that there wasn't a lot in it, but that the company got to pick up the tab for insurance and maintenance, so we were better off from a personal perspective.
Super Slo Mo said:
Not necessarily, the OP needs to do his own sums.
If he wants something 'fun' and interesting, then yes, I'd agree, but if it's just a car to run around in, then it doesn't have to cost much at all.
For example, the BIK amount I pay, as a lower rate taxpayer admittedly, is around £30 ish per month. There's no way I can fund a car for this.
Ok, I could pay myself bigger dividends to the tune of the £260 ish plus VAT (half reclaimed, call it £300 all in) that the company spends each month, but then I'd probably be in the 40% tax bracket, so would lose out in other ways.
Each person's circumstances and requirements are different, I would recommend the OP gets a spreadsheet going and works it out for himself. If he's doing low miles, he could potentially get something reasonable for well under £200 per month, without a huge BIK penalty to pay either.
My calculations were that there wasn't a lot in it, but that the company got to pick up the tab for insurance and maintenance, so we were better off from a personal perspective.
Indeed it depends on the circumstances, but I think the case you describe for your own vehicle is very much an exception - in every case I've ever looked at, its cheaper (and far simpler) to run privately and expense mileage. The BIK route only works for specific circumstances involving hybrids, or very low cost / low CO2 supermini type things, and low mileage.If he wants something 'fun' and interesting, then yes, I'd agree, but if it's just a car to run around in, then it doesn't have to cost much at all.
For example, the BIK amount I pay, as a lower rate taxpayer admittedly, is around £30 ish per month. There's no way I can fund a car for this.
Ok, I could pay myself bigger dividends to the tune of the £260 ish plus VAT (half reclaimed, call it £300 all in) that the company spends each month, but then I'd probably be in the 40% tax bracket, so would lose out in other ways.
Each person's circumstances and requirements are different, I would recommend the OP gets a spreadsheet going and works it out for himself. If he's doing low miles, he could potentially get something reasonable for well under £200 per month, without a huge BIK penalty to pay either.
My calculations were that there wasn't a lot in it, but that the company got to pick up the tab for insurance and maintenance, so we were better off from a personal perspective.
Also worth noting BIK rates are on very steeply inclined escalator - your 2015 BIK rate for a hybrid will increase 40% to 7% next year under the current budget!
Yes I'd spotted the increase. It might not work for us when these come to the end of the lease but I will check.
The last time I ran the figures, in October, it worked out broadly similar to have a private car costing around £5k.
Instead we get brand new ones. Reliability is the overriding factor to us as a breakdown could potentially cause havoc.
Last time we had Skoda Superbs which also worked out ok.
We do around 15-20000 miles per year.
I have spreadsheets of running cost data going back to the 90's, so I'm fairly confident my figures are good.
The last time I ran the figures, in October, it worked out broadly similar to have a private car costing around £5k.
Instead we get brand new ones. Reliability is the overriding factor to us as a breakdown could potentially cause havoc.
Last time we had Skoda Superbs which also worked out ok.
We do around 15-20000 miles per year.
I have spreadsheets of running cost data going back to the 90's, so I'm fairly confident my figures are good.
offshorematt2 said:
If it's just for the commute to the station, why not get a commercial vehicle like a pickup or van? As I understand it, the BIK is much lower and you benefit from reduced road tax and potentially VAT back too?
This. Exactly why LandRover made the Commercial Discovery. They hold there value very well as well (however id imagine you would lease)
R1 Indy said:
offshorematt2 said:
If it's just for the commute to the station, why not get a commercial vehicle like a pickup or van? As I understand it, the BIK is much lower and you benefit from reduced road tax and potentially VAT back too?
This. Exactly why LandRover made the Commercial Discovery. They hold there value very well as well (however id imagine you would lease)
The hybrids, of course, are way under, but there are still some conventional cars that are less than that too.
Again, it's something I looked at in detail, but at the moment the numbers still work out in favour of a car provided by the company.
Of course, as has been said already, it depends what type of car you want or need.
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