Buying an EV via a Ltd company
Discussion
sambucket said:
If gov wants to incent EVs they should expand to personal purchases too!?
There isn't really a way of applying the same mechanism to personal purchases. They could increase the grant, but I don't think it is necessary.IIRC around 8% of new cars registered are company cars. So a good portion of will become EVs from next year. Should be a nice, albeit temporary and somewhat artificial way, of driving new EV sales.
As an aside, I think Porsche will likely do very well next year if they can make enough Taycans, as this is going to be a very good value way of buying a new Porsche.
Sorry to hijack the thread slightly, but are there (either now or next April)
any tax incentives/reliefs for purchasing an EV which apply to the majority
of self-employed people (such as myself) who are:
- not set up as a Limited Company
- not VAT registered
- not using the vehicle for 100% business (more like 50/50)
...or would I just have to pay for the full purchase cost of an EV
out of my post tax profits?
any tax incentives/reliefs for purchasing an EV which apply to the majority
of self-employed people (such as myself) who are:
- not set up as a Limited Company
- not VAT registered
- not using the vehicle for 100% business (more like 50/50)
...or would I just have to pay for the full purchase cost of an EV
out of my post tax profits?
You can have the business proportion of running costs set off against tax - and capital cost 100% write off in year one x 50% business proportion and pay tax on 50% of disposal proceeds. Not sure about charging costs - I would expect business proportion only as deduction. The incentives are targeted at employees’ cars
EddieSteadyGo said:
SOL111 said:
Ah, I didn't say that this will be allowed for 100% personal use. That may be possible but you'll have to check.
It is allowed for 100% personal use. The company is effectively buying a car for its employee to use as a staff benefit in lieu of perhaps extra salary.
This is why the car incurs a personal 'benefit in kind' tax based on the government's view of the approx value of the benefit being received. It is also why the company has to pay national insurnace on the benefit being received by the employee, just as it would if the money was being paid as a salary to the employee.
I understand the latter but just was not 100% about full personal use so wasn't going to suggest anything but to check first.
Appreciate the clarification though.
OK so I currently have a 30kwh Leaf, thinking about an upgrade. I have a newly started limited co with a profit of about £25k set to grow at 15% per year.
I have been claiming all my mileage at 45p a mile when I was a sole trader.
Thinking about an ID Buzz, but I think it may be delivered too late after April 2021 when the 100% rebate ends, so probably a Model 3. Anyone know roughly what the cheapest Model 3 with AP is likely to cost and when it would be delivered.
I am thinking if it is £45k that is £9k to write off against tax, but is this only for the first year of purchase? My tax would be about £5k per year, and the full value I can write off would be £9k. Does this carry over as a loss? Think I might need to get EricMc on the case to make sure it is worth it with BIK and the insurance is likely to be more like £800 than the £200 I pay for the Leaf, judging by my mates X cost to insure.
I have been claiming all my mileage at 45p a mile when I was a sole trader.
Thinking about an ID Buzz, but I think it may be delivered too late after April 2021 when the 100% rebate ends, so probably a Model 3. Anyone know roughly what the cheapest Model 3 with AP is likely to cost and when it would be delivered.
I am thinking if it is £45k that is £9k to write off against tax, but is this only for the first year of purchase? My tax would be about £5k per year, and the full value I can write off would be £9k. Does this carry over as a loss? Think I might need to get EricMc on the case to make sure it is worth it with BIK and the insurance is likely to be more like £800 than the £200 I pay for the Leaf, judging by my mates X cost to insure.
I’m in the same boat. Looking to purchase a LR AWD Model 3 as a company car which I think will cost about £51k but after the Government incentive and allowing for the Corporation Tax deduction should cost the company £38k. I then have the benefit of costs such as maintenance and insurance being paid by the company and therefore saving VAT and Corporation Tax.
I didn’t know that it was possible to claim for the electricity to charge at home, I thought the charge point had to be at work but if it’s legitimate to claim for power from a home charge point that sounds good. The BIK rate is a pain at 16% right now but the huge drop next year is good news. Ideally I should buy it at the end of this year but I don’t think I’ll want to wait until then. I’ve seen loads of good reviews of the Model 3.
Thanks for the information posted.
I didn’t know that it was possible to claim for the electricity to charge at home, I thought the charge point had to be at work but if it’s legitimate to claim for power from a home charge point that sounds good. The BIK rate is a pain at 16% right now but the huge drop next year is good news. Ideally I should buy it at the end of this year but I don’t think I’ll want to wait until then. I’ve seen loads of good reviews of the Model 3.
Thanks for the information posted.
Does anyone know how the 20/40 rate is determined?
Higher rate income threshold, is something like 37k. So if i get 10k salary + 28k divi = 38k income, i pay the 40% rate on the bik? But if I fix it so my income is 37k, I will pay 20%? Or is it split into both bands?
Also is the BIK based on the purchase price of the vehicle before incentive? So in 10 years time, it will still be based on the original RRP?
Higher rate income threshold, is something like 37k. So if i get 10k salary + 28k divi = 38k income, i pay the 40% rate on the bik? But if I fix it so my income is 37k, I will pay 20%? Or is it split into both bands?
Also is the BIK based on the purchase price of the vehicle before incentive? So in 10 years time, it will still be based on the original RRP?
Edited by anonymous-user on Monday 29th April 16:49
sambucket said:
Higher rate income threshold, is something like 37k. So if i get 10k salary + 28k divi = 38k income, i pay the 40% rate on the bik? But if I fix it so my income is 37k, I will pay 20%?
Also is the BIK based on the purchase price of the vehicle before incentive? So in 10 years time, it will still be based on the original RRP?
On your first point, if you pay a single pound into the threshold you are considered to be a higher rate tax payer. And, as you say, if you are just below, it will be 20%.Also is the BIK based on the purchase price of the vehicle before incentive? So in 10 years time, it will still be based on the original RRP?
The BIK is not based on the purchase price. It is based on the RRP. So for example, if you get a discount, you don't reduce the BIK liability.
sambucket said:
Does anyone know how the 20/40 rate is determined?
Higher rate income threshold, is something like 37k. So if i get 10k salary + 28k divi = 38k income, i pay the 40% rate on the bik? But if I fix it so my income is 37k, I will pay 20%? Or is it split into both bands?
Also is the BIK based on the purchase price of the vehicle before incentive? So in 10 years time, it will still be based on the original RRP?
Technically, the dividend income is always treated as the top slice of your income - but the marginal effect would be that you suffer tax at the higher rate on the car bik. Higher rate income threshold, is something like 37k. So if i get 10k salary + 28k divi = 38k income, i pay the 40% rate on the bik? But if I fix it so my income is 37k, I will pay 20%? Or is it split into both bands?
Also is the BIK based on the purchase price of the vehicle before incentive? So in 10 years time, it will still be based on the original RRP?
Edited by sambucket on Monday 29th April 16:49
And yes the bik will always be based on the appropriate % x original list price
Remember personal allowance
You can earn £50k and pay 20% marginal tax
https://www.gov.uk/income-tax-rates
You can earn £50k and pay 20% marginal tax
https://www.gov.uk/income-tax-rates
MrMajic said:
If a business purchases the car it can’t claim back VAT (unless you’re a driving school or taxi), but does anyone know if this changes if you purchase via the Hire Purchase option?
No. You can claim back half the VAT on contract hire but none of it if you buy on Hire Purchase (claim back all the VaT on maintenance costs however you buy / rentoop north said:
MrMajic said:
If a business purchases the car it can’t claim back VAT (unless you’re a driving school or taxi), but does anyone know if this changes if you purchase via the Hire Purchase option?
No. You can claim back half the VAT on contract hire but none of it if you buy on Hire Purchase (claim back all the VaT on maintenance costs however you buy / rent
I recently set up a ltd company to invest in a couple of residential BTL properties. My wife and I are shareholders in the company and I am the director.
I don't intend to draw any salary/dividend from the company until I am retired in about 20 years time.
I need to change my car to avoid the ULEZ charge in the next year or so. After seeing this thread, I wonder if my company could buy an electric car for me to use. The car will be mainly for personal use but I will visit the BTL properties for occasional maintenance issues. As a director of the company with no salary or dividend from the company, would this be allowed?
If it is allowed, I would probably purchase a 3 years old car rather than a new car. Am I correct in thinking that I can still use the Capital Allowance rule to reduce the company profit by 18% of the cost of the car each year for 5-6 years?
I understand that I will need to pay income tax and NIC on the BIK but as the BIK value is only 2% of the car book value when new from April 2020, this should be minimal. Is this correct?
I know that HMRC can change the 2% figure in subsequent years but that's a risk I am willing to take.
I don't intend to draw any salary/dividend from the company until I am retired in about 20 years time.
I need to change my car to avoid the ULEZ charge in the next year or so. After seeing this thread, I wonder if my company could buy an electric car for me to use. The car will be mainly for personal use but I will visit the BTL properties for occasional maintenance issues. As a director of the company with no salary or dividend from the company, would this be allowed?
If it is allowed, I would probably purchase a 3 years old car rather than a new car. Am I correct in thinking that I can still use the Capital Allowance rule to reduce the company profit by 18% of the cost of the car each year for 5-6 years?
I understand that I will need to pay income tax and NIC on the BIK but as the BIK value is only 2% of the car book value when new from April 2020, this should be minimal. Is this correct?
I know that HMRC can change the 2% figure in subsequent years but that's a risk I am willing to take.
There was a discussion on speakev on this
https://www.speakev.com/threads/bik-if-earning-no-...
Conclusion is that it probably isn’t the best way to drive an EV for most instances, but you need to run the numbers for your own situation
https://www.speakev.com/threads/bik-if-earning-no-...
Conclusion is that it probably isn’t the best way to drive an EV for most instances, but you need to run the numbers for your own situation
You can have a company car and no salary or dividends. Though you will need a PAYE scheme to be able to do this, even if no salary is drawn.
From April 2020 and the drop in benefit in kind rates, the electric/hybrid uptake among business users is going to increase massively. For higher rate taxpayers, it'll be a no brainer.
In terms of new vs used, much of it will come down to the financial realities of the overall cost rather than the taxation of the benefit.
From April 2020 and the drop in benefit in kind rates, the electric/hybrid uptake among business users is going to increase massively. For higher rate taxpayers, it'll be a no brainer.
In terms of new vs used, much of it will come down to the financial realities of the overall cost rather than the taxation of the benefit.
996c2 said:
If it is allowed, I would probably purchase a 3 years old car rather than a new car. Am I correct in thinking that I can still use the Capital Allowance rule to reduce the company profit by 18% of the cost of the car each year for 5-6 years?
I understand that I will need to pay income tax and NIC on the BIK but as the BIK value is only 2% of the car book value when new from April 2020, this should be minimal. Is this correct?
I'm not an accountant but what you have posted is my understanding too.I understand that I will need to pay income tax and NIC on the BIK but as the BIK value is only 2% of the car book value when new from April 2020, this should be minimal. Is this correct?
You would pay for it in year 1, which would affect your cashflow, and your profit would be reduced each year by 18% as the asset was depreciated on your accounts.
On your second point, yes, you would pay 2% BIK of the original RRP at your marginal tax rate from next April.
Whether people are inclined to buy a new EV, lease one or buy a used one, I agree with the point above, this is going to become *very* popular next year for owner/directors of limited companies.
ETA : This is making me wonder as well. If you already owned an EV personally, you could get it valued and sell it to the company at the current market value. The company would then pay for insurance, repairs, maintenance and a portion of the depreciation all from pre-taxed income with minimal BIK penalty.
Edited by EddieSteadyGo on Saturday 4th May 13:53
EddieSteadyGo said:
I'm not an accountant but what you have posted is my understanding too.
You would pay for it in year 1, which would affect your cashflow, and your profit would be reduced each year by 18% as the asset was depreciated on your accounts.
On your second point, yes, you would pay 2% BIK of the original RRP at your marginal tax rate from next April.
Whether people are inclined to buy a new EV, lease one or buy a used one, I agree with the point above, this is going to become *very* popular next year for owner/directors of limited companies.
ETA : This is making me wonder as well. If you already owned an EV personally, you could get it valued and sell it to the company at the current market value. The company would then pay for insurance, repairs, maintenance and a portion of the depreciation all from pre-taxed income with minimal BIK penalty.
Thanks everyone for the prompt and informative replies. You would pay for it in year 1, which would affect your cashflow, and your profit would be reduced each year by 18% as the asset was depreciated on your accounts.
On your second point, yes, you would pay 2% BIK of the original RRP at your marginal tax rate from next April.
Whether people are inclined to buy a new EV, lease one or buy a used one, I agree with the point above, this is going to become *very* popular next year for owner/directors of limited companies.
ETA : This is making me wonder as well. If you already owned an EV personally, you could get it valued and sell it to the company at the current market value. The company would then pay for insurance, repairs, maintenance and a portion of the depreciation all from pre-taxed income with minimal BIK penalty.
Edited by EddieSteadyGo on Saturday 4th May 13:53
The situation seems to be as I thought and is definitely worth looking into further between now and April 2020.
The 2% BIK figure is unlikely to last for very long as it's very easy generous. I guess they will have to give us the figure for 2021/2022 by April 2020 so will help make up my mind.
EddieSteadyGo said:
ETA : This is making me wonder as well. If you already owned an EV personally, you could get it valued and sell it to the company at the current market value. The company would then pay for insurance, repairs, maintenance and a portion of the depreciation all from pre-taxed income with minimal BIK penalty.
Again, another no brainer.... Though bear in mind the BIK will be on the list price rather than current market value.Edited by EddieSteadyGo on Saturday 4th May 13:53
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