Please could someone explain BiK for Company Car
Discussion
I’m a director of a small LTD Company and am having to do quite a long journey to work in a company van which is costing nearly £200 a week in diesel.
I’ve been working it out and am thinking I could quite possibly be a lot better off getting an EV company car instead, something like a 5 ish year old Model 3 Long Range and claiming it as a BiK/Company car.
I pay myself under the 40% threshold but then do take a dividend once or twice a year too.
I’ve tried working it out on the car calculators and it looks like it would only cost me £30 ish a month in BiK tax, just checking that would be right or if I’ve messed up how it works royally?, just wanted to try and get my head round the whole thing without bothering my accountant tbh!.
I’ve been working it out and am thinking I could quite possibly be a lot better off getting an EV company car instead, something like a 5 ish year old Model 3 Long Range and claiming it as a BiK/Company car.
I pay myself under the 40% threshold but then do take a dividend once or twice a year too.
I’ve tried working it out on the car calculators and it looks like it would only cost me £30 ish a month in BiK tax, just checking that would be right or if I’ve messed up how it works royally?, just wanted to try and get my head round the whole thing without bothering my accountant tbh!.
Walter Sobchak said:
I m a director of a small LTD Company and am having to do quite a long journey to work in a company van which is costing nearly £200 a week in diesel.
I ve been working it out and am thinking I could quite possibly be a lot better off getting an EV company car instead, something like a 5 ish year old Model 3 Long Range and claiming it as a BiK/Company car.
I pay myself under the 40% threshold but then do take a dividend once or twice a year too.
I ve tried working it out on the car calculators and it looks like it would only cost me £30 ish a month in BiK tax, just checking that would be right or if I ve messed up how it works royally?, just wanted to try and get my head round the whole thing without bothering my accountant tbh!.
Last time I looked at this it was an absolute convoluted nightmare. I ve been working it out and am thinking I could quite possibly be a lot better off getting an EV company car instead, something like a 5 ish year old Model 3 Long Range and claiming it as a BiK/Company car.
I pay myself under the 40% threshold but then do take a dividend once or twice a year too.
I ve tried working it out on the car calculators and it looks like it would only cost me £30 ish a month in BiK tax, just checking that would be right or if I ve messed up how it works royally?, just wanted to try and get my head round the whole thing without bothering my accountant tbh!.
Things may have changed but I worked out that the only thing that came anywhere clear to working was an outright purchase of a brand new EV. On a second hand car the BiK is what the new value of the car was, not what you paid for it.
Bear in mind the last time I looked into this, a Tesla was the only EV available and was like £50k+ so things may have changed.
edit: The rules for leasing are completely different again.
When a company buys a brand new EV, it gets the tax relief (purchase price multiplied by the applicable corporation tax rate between 19% - 26.5% depending on profits) in the year of purchase. When the company later sells the EV it will pay tax on the sales proceeds. So - overall the company gets tax relief on the depreciation.
The same will generally apply for second hand EVs, but rather than getting a big tax reduction in the year of purchase and then a big tax increase in the year of sale, the tax relief is spread over the ownership of the car. It works out the same though - tax relief on the depreciation.
So - the idea that there is no benefit to buying a second hand EV isn't really true.
Bear in mind though (as mentioned above) that the BIK (company car tax payable by the individual) is based on the original list price, not the purchase price.
Also bear in mind that the BIK % (which rose to 3% in April) is planned to increase to 9% by 2030.
The same will generally apply for second hand EVs, but rather than getting a big tax reduction in the year of purchase and then a big tax increase in the year of sale, the tax relief is spread over the ownership of the car. It works out the same though - tax relief on the depreciation.
So - the idea that there is no benefit to buying a second hand EV isn't really true.
Bear in mind though (as mentioned above) that the BIK (company car tax payable by the individual) is based on the original list price, not the purchase price.
Also bear in mind that the BIK % (which rose to 3% in April) is planned to increase to 9% by 2030.
Clockwork Cupcake said:
Last time I looked at this it was an absolute convoluted nightmare.
Things may have changed but I worked out that the only thing that came anywhere clear to working was an outright purchase of a brand new EV. On a second hand car the BiK is what the new value of the car was, not what you paid for it.
Bear in mind the last time I looked into this, a Tesla was the only EV available and was like £50k+ so things may have changed.
edit: The rules for leasing are completely different again.
It does seem a bit of a minefield!, I know the BiK is worked out on the original purchase price and a Model 3 is about the £50k mark, unfortunately I don’t think leasing is a viable option for me either as doing 40/50k miles a year in a lease would be financial suicide!.Things may have changed but I worked out that the only thing that came anywhere clear to working was an outright purchase of a brand new EV. On a second hand car the BiK is what the new value of the car was, not what you paid for it.
Bear in mind the last time I looked into this, a Tesla was the only EV available and was like £50k+ so things may have changed.
edit: The rules for leasing are completely different again.
I’m really struggling to work out the most cost effective way of doing it- few year old Model 3 or carry on with the £800 ish a month in diesel.
Walter Sobchak said:
It does seem a bit of a minefield!, I know the BiK is worked out on the original purchase price and a Model 3 is about the £50k mark, unfortunately I don t think leasing is a viable option for me either as doing 40/50k miles a year in a lease would be financial suicide!.
Yes, that was the point at which I gave up investigating too, as I too was doing a long-distance commute at the time. I just continued to expense it at mileage rates on my private car until I hit the 24 month rule. Then I negotiated a rate increase with the client to cover. I doubt I would want to commute that again, especially in this post-Covid remote working landscape.
Walter Sobchak said:
It does seem a bit of a minefield!, I know the BiK is worked out on the original purchase price and a Model 3 is about the £50k mark, unfortunately I don t think leasing is a viable option for me either as doing 40/50k miles a year in a lease would be financial suicide!.
I m really struggling to work out the most cost effective way of doing it- few year old Model 3 or carry on with the £800 ish a month in diesel.
You can get a model 3 on 30K per annum for £400+VAT per month, so it'll depend if you can find someone who'll do a deal on more miles. With the price of lease deals at the moment on the model 3, you could probably lease two of them and be many thousands better off than your current situation.I m really struggling to work out the most cost effective way of doing it- few year old Model 3 or carry on with the £800 ish a month in diesel.
MaxFromage said:
You can get a model 3 on 30K per annum for £400+VAT per month, so it'll depend if you can find someone who'll do a deal on more miles. With the price of lease deals at the moment on the model 3, you could probably lease two of them and be many thousands better off than your current situation.
The other thing to look into is what are the penalties for going over the allowed mileage. If it's just a per-mile charge then do the sums as it may be viable to simply pay it. Although be sure to read all small printAlso, I believe that the VAT can be claimed back on leasing. But you cannot claim back all of the VAT if you are purchasing, even for a vehicle that qualifies.
(Obviously this is not financial advice and you should consult your accountant)
Edited by Clockwork Cupcake on Wednesday 2nd July 23:06
I bought a 21 plate model 3 LR AWD. Cost £24,490 ish, now worth £20,500 (tho I paid for perf upgrade). I pay a loan off taken out personally. The charger and insurance is paid by the Ltd co. The payable BIK was £109 ish for the year.
I barely use it for business and insurance was £670 with out using my NCB personally accrued.
Everything is cheap except the depreciation which seems to be £400 pm- Obviously all costs offset.
The Tesla lease deals could be better value but this is on my terms and was a trial.
The car is great, quicker than almost anything around, no one is interested in it, costs about £5-10 a week for school runs and standby cameras always on (they use 3% a day ish). Range is 210 miles at 75 mph I reckon now. Not 290 as when new. With aircon. It s driven spiritedly everywhere and I m more than happy with it. I think ? charge is like £12 but it s so cheap we don t count it really at 7p kwh..
Just do it!
I barely use it for business and insurance was £670 with out using my NCB personally accrued.
Everything is cheap except the depreciation which seems to be £400 pm- Obviously all costs offset.
The Tesla lease deals could be better value but this is on my terms and was a trial.
The car is great, quicker than almost anything around, no one is interested in it, costs about £5-10 a week for school runs and standby cameras always on (they use 3% a day ish). Range is 210 miles at 75 mph I reckon now. Not 290 as when new. With aircon. It s driven spiritedly everywhere and I m more than happy with it. I think ? charge is like £12 but it s so cheap we don t count it really at 7p kwh..
Just do it!
Edited by vindaloo79 on Thursday 3rd July 00:04
AndyAudi said:
This is exactly the kind of thing to bother your accountant with,
Changing from a Van to Car has a few considerations for both you the Employee & the Company buying it .
VAT
VED
PAYE
CORP TAX
To elaborate you said leasing not an option so presume van/car owned.Changing from a Van to Car has a few considerations for both you the Employee & the Company buying it .
VAT
VED
PAYE
CORP TAX
If VAT registered - you get VAT back on a van purchase
VED, is a standard fixed price for vans/commercial vehicles
PAYÉ as said your benefit with a Van for Van & fuel is often more forgiving than a car calculated on list price
Corp Tax, companies can generally write down vans faster than cars, although different for Electric, you’d need to know how accountant treated the van previously & could treat the car as you may land creating a tax liability on selling the van than you might not be able to offset with a car purchase
I’m not sure if I’m my situation I’d be able to buy a used one and have it qualify as a pool car?.
Myself and 1 other employee need to go from our respective homes to the yard which is a 150 mile round trip daily and we share the journey at the moment.
The car wouldn’t be getting used for anything else, maybe an EV van might be the way to go instead but I’d worry they don’t have the range needed.
Myself and 1 other employee need to go from our respective homes to the yard which is a 150 mile round trip daily and we share the journey at the moment.
The car wouldn’t be getting used for anything else, maybe an EV van might be the way to go instead but I’d worry they don’t have the range needed.
Walter Sobchak said:
I m not sure if I m my situation I d be able to buy a used one and have it qualify as a pool car?.
Myself and 1 other employee need to go from our respective homes to the yard which is a 150 mile round trip daily and we share the journey at the moment.
The car wouldn t be getting used for anything else, maybe an EV van might be the way to go instead but I d worry they don t have the range needed.
Home to workplace is not business use, it is commuting. Pool cars technically should overnight at the workplace.Myself and 1 other employee need to go from our respective homes to the yard which is a 150 mile round trip daily and we share the journey at the moment.
The car wouldn t be getting used for anything else, maybe an EV van might be the way to go instead but I d worry they don t have the range needed.
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