Running your car as a business expense

[numtumfutunch]

I have only ever bought modestly priced motors for cash and have occasionally wonders what makes some people buy extravagant cars

For example we have friends who buy a new full fat Rangie ever 2 years, which is fine by me but must cost them £££££

They have a small business and are obviously doing okay if not in the lottery winner or footballer bracket

They must have a degree of business acumen so must be able to write off s significant amount of their costs however I'd be surprised if it was the whole amount of what must be a massive sum of cash

Or am I missing something?

[Dr Interceptor]

From a company car perspective, and to remain above board, if the company owns the car they would need to be filling out a P11D and paying company car tax. If you don't and get audited, it's one of the first things that gets picked up on.

There is nothing to stop you however leasing or buying yourself a nice car, insuring it for business use, paying for your own fuel, but then charging your company 45p per mile for business mileage. If you manage 10k business miles a year, £4,500 should pay for you to run a tidy motor.

[GBB]

Dr Interceptor said:

From a company car perspective, and to remain above board, if the company owns the car they would need to be filling out a P11D and paying company car tax. If you don't and get audited, it's one of the first things that gets picked up on.

There is nothing to stop you however leasing or buying yourself a nice car, insuring it for business use, paying for your own fuel, but then charging your company 45p per mile for business mileage. If you manage 10k business miles a year, £4,500 should pay for you to run a tidy motor.

Good thread. As a small business owner I ponder the best way to finance my vehicles. Unfortunately my mileage is half that so about £2,250 per year of which 50% covers fuel costs (E39 V8) leaving only £1K towards running costs. I fancy something newer but the only "cost effective" way of doing this seems to be getting a low emmissions car and running it as a company car. Therefore I'm really just able to cover depreciation and running costs.

From what i understand it's different if you're self employed as opposed to a ltd. company director as then you can charge all your running costs back but not have to pay company car tax?

[wackojacko]

As said above by Dr Interceptor.
.
If offsetting a vehicle against the company it is split across 4 years so you get a quarter of the value back in tax relief each year. Also Car insurance is tax releivable.

With any vehicle as long as you can offset the initial value you're fine, there's also a tax relief for depreciation. Hence why alot of people bye their cars on finance as it really doesn't matter how you buy the vehicle.

45p per mile really does add up although that is also to cover wear and year.

Edited by wackojacko on Monday 7th January 10:01

[wackojacko]

GBB said:

From what i understand it's different if you're self employed as opposed to a ltd. company director as then you can charge all your running costs back but not have to pay company car tax?

Rules are different for small businesses. Cannot remember exactlt but the benefits are are pretty favourable.

[Dr Interceptor]

The rules and regs do vary wildly depending on whether you're a sole trader or Ltd company. I'd advise getting yourself a good accountant who can advise the best way of doing things to minimise the impact on the business, and remain as tax efficient as possible.

[Ozzie Osmond]

doogz said:

Maybe I'm missing something, but if it's their company, it's their £4500. Who do you think they charge it to? All it really means, is that it's classed as an expense that they won't pay CT @ 20% (depending on how big their company is) on.

The 45p a mile is paid to the car user free of all taxes. Depending whether the company directors pay themselves salary as well as dividends,

• Car user is not assessed to Income Tax, which may save 40% or even 50%
• No National Insurance either.

[Ozzie Osmond]

wackojacko said:

45p per mile really does add up although that is also to cover wear and year.

You'd only run a modest car for that, say a £14,000 new car. The government believes it encourages people to run clean and efficient vehicles.

Last time I looked at the cost of running a "decent" car it was £1 a mile or more.

Check out the total running cost tables on AA and RAC websites. Also,

"The latest RAC Cost of Motoring Index estimates that the yearly cost of owning and running a small car in 2010 was just over half that for a people carrier. They estimate the cost of a small car such as the Vauxhall Astra at £4,466/year, while a Ford Galaxy people carrier costs an estimated £7,816/year. The per-mile costs are 37p and 65p, respectively. The estimates include the cost of finance and depreciation."

[Matt UK]

Some people just enjoy directing a proportion of the money they earn towards nice cars.

It's expensive and there is no 'rational' reason to do it - a Ford Focus is probably all the car 99% of us ever needs. But that goes for nice clothes, posh meals out, houses bigger than you need, exotic holidays.

You can't take it with you when you go!

Also, some circles work on the basis that a nice new car shows you are doing well - this in itself can attract more business.

[tr7v8]

Ozzie Osmond said:

wackojacko said:

45p per mile really does add up although that is also to cover wear and year.

You'd only run a modest car for that, say a £14,000 new car. The government believes it encourages people to run clean and efficient vehicles.

Last time I looked at the cost of running a "decent" car it was £1 a mile or more.

Check out the total running cost tables on AA and RAC websites. Also,

"The latest RAC Cost of Motoring Index estimates that the yearly cost of owning and running a small car in 2010 was just over half that for a people carrier. They estimate the cost of a small car such as the Vauxhall Astra at £4,466/year, while a Ford Galaxy people carrier costs an estimated £7,816/year. The per-mile costs are 37p and 65p, respectively. The estimates include the cost of finance and depreciation."

But those running costs will be a new car, once the car is bought s/h, the depreciation curve changes hugely & the costs drop.

[Ozzie Osmond]

doogz said:

Any small business owner that pays themselves entirely via a PAYE salary wants a new accountant. It's unlikely that PAYE or NI should come into the equation.

However, this is PH where the majority of readers on this thread are not self-employed businessmen and will be wondering how they are affected. I have completed the picture for them, whether they are employees at the local council or directors of Tesco.

The small businessman with a company will be paying 40% income tax on his dividend income over about £42k.

[Ozzie Osmond]

doogz said:

40% income tax on dividend income over £42k? I don't recall that.

It's the effect of the 32.5%. But don't forget the 42.5% rate as well.

By all means carry on confusing people if you want to. Meanwhile I believe my initial post was brief, to the point and helpful for many readers.

[Ozzie Osmond]

tr7v8 said:

But those running costs will be a new car, once the car is bought s/h, the depreciation curve changes hugely & the costs drop.

Yes. If you're happy driving around in a cheap old Nissan Micra there's money to be made tax free!

If you drive a modest new Astra you'll be breaking even.

If you're driving a new Range Rover it will be a small contribution towards your total costs.

[tr7v8]

Ozzie Osmond said:

tr7v8 said:

But those running costs will be a new car, once the car is bought s/h, the depreciation curve changes hugely & the costs drop.

Yes. If you're happy driving around in a cheap old Nissan Micra there's money to be made tax free!

If you drive a modest new Astra you'll be breaking even.

If you're driving a new Range Rover it will be a small contribution towards your total costs.

Or run a car that is just out lease 2-4 years old, reliable & much lower depreciation. I've now gone even older so I've gone from a 2-3 year old S-Type to a 12 year old Grand Cherokee.