Declaring and paying BIK taxes for EV company car

[996c2]

My wife and I set up a limited company to invest in a couple of BTL properties 3 years ago. We are both shareholders and I am the sole director. The company is making a small profit (approx. £25k/year) and we are happy to leave this in the business to invest in further properties when the time is right. The company is not paying any salary or dividends and is not registered for PAYE.

As the company account is very simple, I have been doing the accounts and filling it myself.

To take advantage of the current ultra-low BIK taxes for electric vehicles, I have decided to buy an electric company car for my personal use via our limited company. I understand that I will need to declare the company car as a BIK via a P11D but I am not sure how to go about this. The easiest solution would be to pay an accountant to sort it out but, if the process is not too difficult, I would rather do it myself.

I would be grateful for any advice on declaring and paying taxes on a company car.

[Diderot]

996c2 said:

My wife and I set up a limited company to invest in a couple of BTL properties 3 years ago. We are both shareholders and I am the sole director. The company is making a small profit (approx. £25k/year) and we are happy to leave this in the business to invest in further properties when the time is right. The company is not paying any salary or dividends and is not registered for PAYE.

As the company account is very simple, I have been doing the accounts and filling it myself.

To take advantage of the current ultra-low BIK taxes for electric vehicles, I have decided to buy an electric company car for my personal use via our limited company. I understand that I will need to declare the company car as a BIK via a P11D but I am not sure how to go about this. The easiest solution would be to pay an accountant to sort it out but, if the process is not too difficult, I would rather do it myself.

I would be grateful for any advice on declaring and paying taxes on a company car.

Just a thought - wouldn’t it make more sense to lease the car rather than buy it outright?

I’d definitely ask an accountant to sort it all out for you. I’m leasing an EV through my ltd. and mine does all the paperwork.

[TooLateForAName]

I think that you'd need to register for paye and submit returns.

[Heres Johnny]

With the current fairly glatial depreciation at the moment and the benefits of company owning a EV is the ability to offset the depreciation against tax, and as you either leave the profits invested or pay dividends which are fairly tax efficient, and fiannly if you expense any business miles travelling to the properties where you could pay your self 45p a mile and would only be able to claim 5p if you took a company car, you might need to work on the numbers to ensure its what you want to do.

I didn't bother, any savings through tax were marginal and wiped out by increased costs to administer.

[Fastlane]

Your employer (i.e. you), will need to complete a P46 Car form to let HMRC know that you, as an employee, have a company car. By April, the employer will need to complete a P11Db form and a P11d form which they send to HMRC. HMRC will use these to update your personal tax code and calculate the employer's NI, which the employer will need to pay. You, as the employee, then use the P11d form to complete your self assessment tax return. To complete the P11Db form, the employer will need a PAYE number. I do all this myself as it is pretty straightforward, but I ran it past my accountant first, as should you.

See here: https://www.gov.uk/tell-hmrc-company-car

Edited by Fastlane on Sunday 2nd January 15:41

[thecremeegg]

Diderot said:

Just a thought - wouldn’t it make more sense to lease the car rather than buy it outright?

I’d definitely ask an accountant to sort it all out for you. I’m leasing an EV through my ltd. and mine does all the paperwork.

The company I work for has 2 company cars, one of which is mine. The boss just bough them outright as leasing works out really pricey for any decent mileage. My car was £40k new, and is now worth around £30k after nearly 3 years (covid to thank for that), which works out at under £300 a month. Leasing the same car is twice the price.

[996c2]

Fastlane said:

Your employer (i.e. you), will need to complete a P46 Car form to let HMRC know that you, as an employee, have a company car. By April, the employer will need to complete a P11Db form and a P11d form which they send to HMRC. HMRC will use these to update your personal tax code and calculate the employer's NI, which the employer will need to pay. You, as the employee, then use the P11d form to complete your self assessment tax return. To complete the P11Db form, the employer will need a PAYE number. I do all this myself as it is pretty straightforward, but I ran it past my accountant first, as should you.

See here: https://www.gov.uk/tell-hmrc-company-car

Thanks Fastlane for the comprehensive reply.

I guess step 1 would be for my company to register for PAYE and then complete the P46 Car form.

You mentioned that the P11Db and P11D forms would need to be done by April and HMRC will calculate the employer's NIC from that. Does that mean that my company only has to pay the employer's NIC once a year (rather than monthly if it was paying me a monthly salary)? As my company has never been PAYE registered before, I would be grateful if you (or anyone) could explain what I my obligations are once my company is registered.

I will be declaring the company car BIK on my self assessment tax return as you've suggested and I guess I will have until Jan 2023 to pay this off. Is this right?

[Diderot]

thecremeegg said:

Diderot said:

Just a thought - wouldn’t it make more sense to lease the car rather than buy it outright?

I’d definitely ask an accountant to sort it all out for you. I’m leasing an EV through my ltd. and mine does all the paperwork.

The company I work for has 2 company cars, one of which is mine. The boss just bough them outright as leasing works out really pricey for any decent mileage. My car was £40k new, and is now worth around £30k after nearly 3 years (covid to thank for that), which works out at under £300 a month. Leasing the same car is twice the price.

Yep, it’s an interesting balance - tie up capital in car (the OP mentioned wanting to buy another BTL property) vs cash flow and flexibility. In my case, leasing was better (very low mileage) and I didn’t want to put £55k into a car.

[48k]

Given how quickly EV technology is advancing, personally I wouldn't want to buy an EV and have that chronically depreciating asset on the books for the next 3+ years or whatever. But YMMV. I'd highly recommend speaking to an accountant though. Get some proper advice.

[Heres Johnny]

48k said:

Given how quickly EV technology is advancing, personally I wouldn't want to buy an EV and have that chronically depreciating asset on the books for the next 3+ years or whatever. But YMMV. I'd highly recommend speaking to an accountant though. Get some proper advice.

Can you post some evidence of them being a ‘chronically depreciating asset’ or are you just full of anti EV bull?

[springfan62]

Heres Johnny said:

With the current fairly glatial depreciation at the moment and the benefits of company owning a EV is the ability to offset the depreciation against tax, and as you either leave the profits invested or pay dividends which are fairly tax efficient, and fiannly if you expense any business miles travelling to the properties where you could pay your self 45p a mile and would only be able to claim 5p if you took a company car, you might need to work on the numbers to ensure its what you want to do.

I didn't bother, any savings through tax were marginal and wiped out by increased costs to administer.

This, plus if you purchase now you will get relief at the current rate of corporation tax but when you sell this could be 19%, 25% or the marginal rate of 26.5%.

I am going to buy my car out of the company before March 2023 otherwise I will be paying 26.5% on the balancing charge on the car.

[Muzzer79]

Heres Johnny said:

48k said:

Given how quickly EV technology is advancing, personally I wouldn't want to buy an EV and have that chronically depreciating asset on the books for the next 3+ years or whatever. But YMMV. I'd highly recommend speaking to an accountant though. Get some proper advice.

Can you post some evidence of them being a ‘chronically depreciating asset’ or are you just full of anti EV bull?

I don’t see it as “anti-EV bull”

There’s a very plausible theory that, as EV technology marches on so rapidly, today’s EVs will relatively quickly become undesirable or even obsolete as tomorrow’s EVs have longer range and become cheaper due to economies of scale.

That will affect value. I will soon happily be going down the EV route, but I wouldn’t buy one outright at this point in their development.

[lizardbrain]

Interested in answers to this as I’m not sure I’ve done it right.

I pay myself a salary via my Ltd company. I registered my car online and hmrc changed my tax code. So I pay extra tax ? That’s pretty much all I’ve done on the BIK side. The accountant deals with the depreciation tax wrote off etc.

[springfan62]

It also needs adding to your P11D at the year end and the company has to pay class 1A national insurance on the BIK.

[Fastlane]

996c2 said:

Thanks Fastlane for the comprehensive reply.

I guess step 1 would be for my company to register for PAYE and then complete the P46 Car form.

You mentioned that the P11Db and P11D forms would need to be done by April and HMRC will calculate the employer's NIC from that. Does that mean that my company only has to pay the employer's NIC once a year (rather than monthly if it was paying me a monthly salary)? As my company has never been PAYE registered before, I would be grateful if you (or anyone) could explain what I my obligations are once my company is registered.

I will be declaring the company car BIK on my self assessment tax return as you've suggested and I guess I will have until Jan 2023 to pay this off. Is this right?

Yes, you will need to register with HMRC. In terms of PAYE registration, I am not entirely sure what the current process is as my payroll company sorted that out quite a few years ago when I set up my company. There is a lot of information on the HMRC website that I linked to and this should tell you want you need to do and your on-going responsibilities. In terms of employer's NI, you will need to complete the P11D and P11Db only once per year and then the employer's NI is due to be paid by lump sum by 6th July (there is no employee's NI due on company cars).

In terms of personal tax on the BiK, it will indeed be due by the following January, but remember that your future payments on account will increase.

[996c2]

Fastlane said:

Yes, you will need to register with HMRC. In terms of PAYE registration, I am not entirely sure what the current process is as my payroll company sorted that out quite a few years ago when I set up my company. There is a lot of information on the HMRC website that I linked to and this should tell you want you need to do and your on-going responsibilities. In terms of employer's NI, you will need to complete the P11D and P11Db only once per year and then the employer's NI is due to be paid by lump sum by 6th July (there is no employee's NI due on company cars).

In terms of personal tax on the BiK, it will indeed be due by the following January, but remember that your future payments on account will increase.

Thanks Fastlane for the informative replies and putting my mind at ease on this matter.

I'll be on the phone to HMRC to register for PAYE first thing tomorrow!

[FWIW]

48k said:

Given how quickly EV technology is advancing, personally I wouldn't want to buy an EV and have that chronically depreciating asset on the books for the next 3+ years or whatever. But YMMV. I'd highly recommend speaking to an accountant though. Get some proper advice.

“Chronically depreciating” How out of touch do you want to be?
Why would you keep it 3+ years?

[48k]

FWIW said:

48k said:

Given how quickly EV technology is advancing, personally I wouldn't want to buy an EV and have that chronically depreciating asset on the books for the next 3+ years or whatever. But YMMV. I'd highly recommend speaking to an accountant though. Get some proper advice.

“Chronically depreciating” How out of touch do you want to be?
Why would you keep it 3+ years?

Why wouldn't you?

[FWIW]

48k said:

Why wouldn't you?

Because at the moment you can sell a lightly used one for more than (there or thereabouts) the price of a new one. Get the latest model blah blah…
Why would you?

[48k]

Heres Johnny said:

48k said:

Given how quickly EV technology is advancing, personally I wouldn't want to buy an EV and have that chronically depreciating asset on the books for the next 3+ years or whatever. But YMMV. I'd highly recommend speaking to an accountant though. Get some proper advice.

Can you post some evidence of them being a ‘chronically depreciating asset’ or are you just full of anti EV bull?

My car is an EV so I am far from anti EV just realistic about how expensive they are, how cheaply you can pick up "first gen" EVs now and how quickly the technology is advancing.