Company cars etc etc
Discussion
Hello
I am in the process of hopefully starting my own small business in the next few months. I wish to have a car that will be used for business and personal useage.
Ideally, it will be a new car on some form of finance ie lease, hire purchase etc.
The problem is that I dont really know much about company cars and how it all works. If someone could either help me out with an idiot's guide or point me in the right direction, I would be most grateful.
Basically, I want a smart car. I want to have monthly payments for about 2 or 3 years, which are fixed. Mileage will be about 20k a year, business and personal. At the end of the 2/3 years, I would like to give the car back, without incurring too many additional costs, if any.
As form of deposit, I can put down about £600.
What are the benefits of the different types of finance? What are the negatives? Tax implications etc.
Any information is gratefully received and please feel free to aim it at the lowest common denominator as I am still quite ignorant to all of the ins and outs.
Many thanks in advance
Max
I am in the process of hopefully starting my own small business in the next few months. I wish to have a car that will be used for business and personal useage.
Ideally, it will be a new car on some form of finance ie lease, hire purchase etc.
The problem is that I dont really know much about company cars and how it all works. If someone could either help me out with an idiot's guide or point me in the right direction, I would be most grateful.
Basically, I want a smart car. I want to have monthly payments for about 2 or 3 years, which are fixed. Mileage will be about 20k a year, business and personal. At the end of the 2/3 years, I would like to give the car back, without incurring too many additional costs, if any.
As form of deposit, I can put down about £600.
What are the benefits of the different types of finance? What are the negatives? Tax implications etc.
Any information is gratefully received and please feel free to aim it at the lowest common denominator as I am still quite ignorant to all of the ins and outs.
Many thanks in advance
Max
You have a taxable benefit in kind on the value of the car, anything from 15-35% of the list price, the average £20,000 2.0 litre car will might cost you around £1,300 in tax at 22% or £2,500 at 40% and the company will pay class 1a national insurance at 12.8%. That's if you don't make any capital contributions yourself, which as it's your company, there's little point
It would probably make sense to purchase the car in your own name, and claim mileage at 40p for the first 10,000 business miles and 25p thereafter. You'll also save on some paperwork.
It would probably make sense to purchase the car in your own name, and claim mileage at 40p for the first 10,000 business miles and 25p thereafter. You'll also save on some paperwork.
thewave said:
You have a taxable benefit in kind on the value of the car, anything from 15-35% of the list price, the average £20,000 2.0 litre car will might cost you around £1,300 in tax at 22% or £2,500 at 40% and the company will pay class 1a national insurance at 12.8%. That's if you don't make any capital contributions yourself, which as it's your company, there's little point
It would probably make sense to purchase the car in your own name, and claim mileage at 40p for the first 10,000 business miles and 25p thereafter. You'll also save on some paperwork.
Ooo this sounds interesting and not something I have thought of. Forgive my ignorance, but is it as simple as Max Turbo using his own personal car and getting mileage contributions from the company for every business mile done? How is this documented? Is it just a case of setting up a contract between me and my company stating the business mileage allowance and then just making the relevant payments?It would probably make sense to purchase the car in your own name, and claim mileage at 40p for the first 10,000 business miles and 25p thereafter. You'll also save on some paperwork.
Max
They are valid reasons for working the business through a Ltd Co. But be aware of the additional costs (both admin and tax) that arise from running a company.
As you can probably see from Thw Wave's post, the simple decision of buying a car can become horrendously complex.
Just make sure that ALL the implications of operating as a company are fully understood.
As you can probably see from Thw Wave's post, the simple decision of buying a car can become horrendously complex.
Just make sure that ALL the implications of operating as a company are fully understood.
Max Turbo said:
thewave said:
You have a taxable benefit in kind on the value of the car, anything from 15-35% of the list price, the average £20,000 2.0 litre car will might cost you around £1,300 in tax at 22% or £2,500 at 40% and the company will pay class 1a national insurance at 12.8%. That's if you don't make any capital contributions yourself, which as it's your company, there's little point
It would probably make sense to purchase the car in your own name, and claim mileage at 40p for the first 10,000 business miles and 25p thereafter. You'll also save on some paperwork.
Ooo this sounds interesting and not something I have thought of. Forgive my ignorance, but is it as simple as Max Turbo using his own personal car and getting mileage contributions from the company for every business mile done? How is this documented? Is it just a case of setting up a contract between me and my company stating the business mileage allowance and then just making the relevant payments?It would probably make sense to purchase the car in your own name, and claim mileage at 40p for the first 10,000 business miles and 25p thereafter. You'll also save on some paperwork.
Max
thewave said:
Max Turbo said:
thewave said:
You have a taxable benefit in kind on the value of the car, anything from 15-35% of the list price, the average £20,000 2.0 litre car will might cost you around £1,300 in tax at 22% or £2,500 at 40% and the company will pay class 1a national insurance at 12.8%. That's if you don't make any capital contributions yourself, which as it's your company, there's little point
It would probably make sense to purchase the car in your own name, and claim mileage at 40p for the first 10,000 business miles and 25p thereafter. You'll also save on some paperwork.
Ooo this sounds interesting and not something I have thought of. Forgive my ignorance, but is it as simple as Max Turbo using his own personal car and getting mileage contributions from the company for every business mile done? How is this documented? Is it just a case of setting up a contract between me and my company stating the business mileage allowance and then just making the relevant payments?It would probably make sense to purchase the car in your own name, and claim mileage at 40p for the first 10,000 business miles and 25p thereafter. You'll also save on some paperwork.
Max
Thanks for the advice!
M
Eric Mc said:
They are valid reasons for working the business through a Ltd Co. But be aware of the additional costs (both admin and tax) that arise from running a company.
As you can probably see from Thw Wave's post, the simple decision of buying a car can become horrendously complex.
Just make sure that ALL the implications of operating as a company are fully understood.
Thank you for all the info. You are right, even the simplest of choices or decisions can be very complex and I am always learning. I think I shall bugger off now and do some good old reading on the subject.As you can probably see from Thw Wave's post, the simple decision of buying a car can become horrendously complex.
Just make sure that ALL the implications of operating as a company are fully understood.
Thanks again
M
thewave said:
Max Turbo said:
thewave said:
You have a taxable benefit in kind on the value of the car, anything from 15-35% of the list price, the average £20,000 2.0 litre car will might cost you around £1,300 in tax at 22% or £2,500 at 40% and the company will pay class 1a national insurance at 12.8%. That's if you don't make any capital contributions yourself, which as it's your company, there's little point
It would probably make sense to purchase the car in your own name, and claim mileage at 40p for the first 10,000 business miles and 25p thereafter. You'll also save on some paperwork.
Ooo this sounds interesting and not something I have thought of. Forgive my ignorance, but is it as simple as Max Turbo using his own personal car and getting mileage contributions from the company for every business mile done? How is this documented? Is it just a case of setting up a contract between me and my company stating the business mileage allowance and then just making the relevant payments?It would probably make sense to purchase the car in your own name, and claim mileage at 40p for the first 10,000 business miles and 25p thereafter. You'll also save on some paperwork.
Max
And what's the situation if you are paid for your mileage? I am planning on adding together all the mileage i've done this year, working out how much mileage has been paid for and then the difference I can claim back. Is that correct?
It is really quite simple.
First 10,000 business miles - the company can pay you directly 40p per mile tax free.
After 10,000 miles - the company can pay you at a rate of 25p per mile tax free.
Business miles are exactly that - they do not include the "home to work" commute.
The personal tax allowance (currently £5,225) is really nothing to do with the above and needs to be applied against your actual income from the company i.e. wages or dividends (or a combination of both).
First 10,000 business miles - the company can pay you directly 40p per mile tax free.
After 10,000 miles - the company can pay you at a rate of 25p per mile tax free.
Business miles are exactly that - they do not include the "home to work" commute.
The personal tax allowance (currently £5,225) is really nothing to do with the above and needs to be applied against your actual income from the company i.e. wages or dividends (or a combination of both).
Eric Mc said:
It is really quite simple.
First 10,000 business miles - the company can pay you directly 40p per mile tax free.
After 10,000 miles - the company can pay you at a rate of 25p per mile tax free.
Business miles are exactly that - they do not include the "home to work" commute.
The personal tax allowance (currently £5,225) is really nothing to do with the above and needs to be applied against your actual income from the company i.e. wages or dividends (or a combination of both).
Sorry Eric I should have clarified. When I said paid I meant the companies that I offer my services to - they pay for travel expenses as my office is 'home'. So say they pay a rate of 30p/mile on 20k miles/yr = £6000/yr to my ltd co. Does that then in turn get paid to me the director tax-free plus an extra £500 that my co. can claim tax-free (free from corporation tax etc I assume as its an expense?)First 10,000 business miles - the company can pay you directly 40p per mile tax free.
After 10,000 miles - the company can pay you at a rate of 25p per mile tax free.
Business miles are exactly that - they do not include the "home to work" commute.
The personal tax allowance (currently £5,225) is really nothing to do with the above and needs to be applied against your actual income from the company i.e. wages or dividends (or a combination of both).
No.
If you are "billing" your customers an amount to cover your mileage costs - that is just an extrra level of income for your business. You should, of course, be raising normal sales invoices for these amounts and declaring the relevant VAT content (if your business is VAT registered) on these amounts.
If you are "billing" your customers an amount to cover your mileage costs - that is just an extrra level of income for your business. You should, of course, be raising normal sales invoices for these amounts and declaring the relevant VAT content (if your business is VAT registered) on these amounts.
Eric Mc said:
No.
If you are "billing" your customers an amount to cover your mileage costs - that is just an extrra level of income for your business. You should, of course, be raising normal sales invoices for these amounts and declaring the relevant VAT content (if your business is VAT registered) on these amounts.
Not VAT registered (yet). The invoices are detailed to show payment apportioned for mileage does that make a difference? I thought that these invoices would prove mileage if a query was ever raised as currently I do not keep any other records of mileage than what is in my diary.If you are "billing" your customers an amount to cover your mileage costs - that is just an extrra level of income for your business. You should, of course, be raising normal sales invoices for these amounts and declaring the relevant VAT content (if your business is VAT registered) on these amounts.
Gassing Station | Business | Top of Page | What's New | My Stuff