Ltd Company buying a car = worth it.
Discussion
Here is the deal. My wife and I have a Ltd Company. We pay ourselves a minimal salary and the rest in Dividends.
This year, I predict that we will have £15k worth of profit left above the higher tax/dividend threshold. I don't want to pay ourselves that money as I don't want to pay the 40% tax or dividend tax thingy equivalent.
Could we get the Company to buy a new car for around £15k with a BIK tax rate of 14% and therefore save tax even if we (both ? just one of us ?) end up paying company car BIK thingy.
We happen to need a new car.
What did I miss ?
This year, I predict that we will have £15k worth of profit left above the higher tax/dividend threshold. I don't want to pay ourselves that money as I don't want to pay the 40% tax or dividend tax thingy equivalent.
Could we get the Company to buy a new car for around £15k with a BIK tax rate of 14% and therefore save tax even if we (both ? just one of us ?) end up paying company car BIK thingy.
We happen to need a new car.
What did I miss ?
Edited by nickfrog on Thursday 3rd July 23:08
The car will be a 'capital' purchase so you will only get corporation tax relief for part of the cost under depreciation.
Class 1a NI will be liable.
BIK tax based on the price when new will be levied on the employee benefiting from the car. That may well take them into 40% income tax.
Not worth all the grief for Ltd owners in my opinion.
Class 1a NI will be liable.
BIK tax based on the price when new will be levied on the employee benefiting from the car. That may well take them into 40% income tax.
Not worth all the grief for Ltd owners in my opinion.
PurpleMoonlight said:
The car will be a 'capital' purchase so you will only get corporation tax relief for part of the cost under depreciation.
Not actually true. "Accounting Depreciation" (in most cases) is IGNORED for tax purposes. HMRC substitutes "Capital Allowances" when calculating the capital offset against the company profits. The problem with Capital Allowances on most cars is that the rate of Capital Allowance is a lot less than the true depreciation of the vehicle.Unless someone wants to use a eco-friendly car or a vehicle which is classified as a Commercial Vehicle (rather than a Motor Car), in most cases it is best for the company not to buy the car but for the director to buy it personally and then reclaim motoring costs at 45p/25[p per mile.
Assuming you are going to buy a car anyway and need to decide whether to buy personally or through Limited Company. Don't buy one just to save tax.
If you buy a new car with a list price of £15,000 and BIK tax rate of 14% you will pay income tax as though you had earned an extra £2,100 per year which is apportioned daily while the car is available to you. The Limited Company will pay employers NI at 13.8% on this benefit. The Company will be able to claim capital allowances of 18% of the cost of the car per year on a reducing balance basis, although it is only 8% if the CO2 is over 130g/km.
To buy the car personally you will need to pay yourself dividends of £15,000 which will lead to you being taxed as though you had earned £16.666.66 and will come off the Company's profit after tax.
I looked at this for myself last year and decided it was worth running the car through the company, although it might not be if the CO2 emissions were much higher. I also change cars every 3 years or so, if you run your cars for longer it may be different. When the car is sold any difference between the capital allowances claimed and the actual loss is shown in the company's profit and loss, so the capital allowance only delays you claiming the full cost, also any running costs with the exception of fuel can be paid by the company. You can claim 15p per mile for fuel used on business journeys.
I am not an accountant and cannot guarantee the accuracy of these comments. I suggest you speak to your accountant.
If you buy a new car with a list price of £15,000 and BIK tax rate of 14% you will pay income tax as though you had earned an extra £2,100 per year which is apportioned daily while the car is available to you. The Limited Company will pay employers NI at 13.8% on this benefit. The Company will be able to claim capital allowances of 18% of the cost of the car per year on a reducing balance basis, although it is only 8% if the CO2 is over 130g/km.
To buy the car personally you will need to pay yourself dividends of £15,000 which will lead to you being taxed as though you had earned £16.666.66 and will come off the Company's profit after tax.
I looked at this for myself last year and decided it was worth running the car through the company, although it might not be if the CO2 emissions were much higher. I also change cars every 3 years or so, if you run your cars for longer it may be different. When the car is sold any difference between the capital allowances claimed and the actual loss is shown in the company's profit and loss, so the capital allowance only delays you claiming the full cost, also any running costs with the exception of fuel can be paid by the company. You can claim 15p per mile for fuel used on business journeys.
I am not an accountant and cannot guarantee the accuracy of these comments. I suggest you speak to your accountant.
Eric Mc said:
Unless someone wants to use a eco-friendly car or a vehicle which is classified as a Commercial Vehicle (rather than a Motor Car), in most cases it is best for the company not to buy the car but for the director to buy it personally and then reclaim motoring costs at 45p/25[p per mile.
That's my understanding too.http://www.mitsubishi-cars.co.uk/outlander/bik.asp...
Blimey... 5% BIK and 100% Capital Allowance in the first year.
Blimey... 5% BIK and 100% Capital Allowance in the first year.
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