Leasing A Car Through the Company
Discussion
Powerfully built company director here and I am thinking about leasing a car through my Ltd company. Now I've done a search and the oft repeated advice seems to be that it's usually not worth the bother and it's better to just claim back your business mileage at 45ppm. However I only do about 4-5000 miles per annum so this isn't really cost effective for me.
The pros of leasing through a company look much better, the lease costs are fully paid for by the company as well as the insurance, road tax and maintenance costs. I would be paying for my own fuel so the only thing I'd have to pay is BIK on the car which on relatively low emissions cars I am looking at work out to about £1200 a year. To me this is a no brainer, especially as I have surplus cash in the company accounts so I'd rather the company paid for my boring business car rather than me paying for it out of my own pocket. Am I missing something? What's the catch and why are people usually being dissuaded from what to me looks like a good idea on paper?
The pros of leasing through a company look much better, the lease costs are fully paid for by the company as well as the insurance, road tax and maintenance costs. I would be paying for my own fuel so the only thing I'd have to pay is BIK on the car which on relatively low emissions cars I am looking at work out to about £1200 a year. To me this is a no brainer, especially as I have surplus cash in the company accounts so I'd rather the company paid for my boring business car rather than me paying for it out of my own pocket. Am I missing something? What's the catch and why are people usually being dissuaded from what to me looks like a good idea on paper?
There isn't a catch, it's a cost effective way of running a new car. You have to give it back in reasonable condition, or there are sometimes fees to pay, although we've not had any so far, as fair wear and tear is acceptable. You also pay an excess mileage if you go over the agreed amount, but it's only in keeping with the extra monthly rentals you'd pay if you declared the mileage up front.
£1,200 sounds a massive amount for BIK though, what are you considering? Or are you a higher rate tax payer? For reference, mine is more like £300, but I'm a lower rate tax payer with an 11% BIK car.
£1,200 sounds a massive amount for BIK though, what are you considering? Or are you a higher rate tax payer? For reference, mine is more like £300, but I'm a lower rate tax payer with an 11% BIK car.
marshalla said:
5000x0.45 = +2250 (which covers your insurance, fuel, maintenance for a year with a bit left over, I reckon)
BIK= -1200
One goes into your pocket and pays for maintenance of an asset you own, one comes out and pays for someone else.
That doesn't take into account the £400 odd a month I pay out of my own pocket at the moment to effectively "rent" a fairly newish car (it's on PCP). Not wanting to get into the arguments about the merits of financing\leasing etc but I need a new or fairly newish hassle free (i.e. reliable) car to go to client sites. This is my workhorse so paying in cash for a depreciating asset or running a deprecation proof classic is off the cards so I'd rather the company paid that £40O odd out of pre-tax turnover rather than me paying for it out of my post tax earnings.BIK= -1200
One goes into your pocket and pays for maintenance of an asset you own, one comes out and pays for someone else.
Yes I could get a car with even lower BIK but I want something at least semi interesting so I don't fall asleep at the wheel.

I will be paying for my own fuel so no BIK on fuel. I wasn't aware I could still claim back mileage on a company leased car though, how does one work out the agreed per mile rate?
I know BIK is going up but I've checked the figures for the next 3 years and it still makes sense to me. After that I'll review again.
Guvernator said:
I will be paying for my own fuel so no BIK on fuel. I wasn't aware I could still claim back mileage on a company leased car though, how does one work out the agreed per mile rate?
It's on the HMRC website. It's based on engine size and fuel type, for example, a 2.0 diesel is currently 13 pence per mile, a 2.0 litre petrol is 16 pence per mile. My 1.8 litre hybrid is also 16 pence per mile as it's classed as a petrol. The rate for smaller engines is a little less (I think it's below 1.6 litres), while the rate for engines bigger than 2.0 litres is a little more, but I can't be specific as I don't know without looking it up.Super Slo Mo said:
It's on the HMRC website. It's based on engine size and fuel type, for example, a 2.0 diesel is currently 13 pence per mile, a 2.0 litre petrol is 16 pence per mile. My 1.8 litre hybrid is also 16 pence per mile as it's classed as a petrol. The rate for smaller engines is a little less (I think it's below 1.6 litres), while the rate for engines bigger than 2.0 litres is a little more, but I can't be specific as I don't know without looking it up.
Aha, excellent so even better news as I get some money back for fuel. So just to sum up.If leased through the company
Company pays
Leasing costs £400-£500 a month (out of pre-tax turnover)
Maintenance
Road Tax
Insurance
Fuel at a rate determined by HMRC (around 13-16ppm)
I pay
BIK anywhere from around £300-£1300 a year depending on the car I chose but this increases slightly every year.
Vs me paying for it personally
Company pays
45p per mile
I pay
PCP\HP finance costs of £400-£500 a month (out of post tax earnings)
Insurance
Road Tax
Mainetenance
Sounds like a no brainer to me so not sure why it's mostly frowned on? Does the fact that I may also use the car for occasional private use, say about 2000 miles per year have any baring or is this a no no?
Super Slo Mo said:
Nope, thats what the BIK covers.
Excellent thanks, sounds like a done deal. Now onto some websites to try to find a car that won't break the BIK bank while at the same time being at least somewhat interesting to drive. It's a shame the i8's and Tesla's are so expensive. We could do with a nice performance orientated hybrid or EV in the £30-£50k price range.

Guvernator said:
Excellent thanks, sounds like a done deal. 
Now onto some websites to try to find a car that won't break the BIK bank while at the same time being at least somewhat interesting to drive. It's a shame the i8's and Tesla's are so expensive. We could do with a nice performance orientated hybrid or EV in the £30-£50k price range.
Lexus GS? Not terribly involving, and better suited to long distances probably. No idea how much they are either, but I'm currently a bit of a fan of the Toyota/Lexus stuff. Now onto some websites to try to find a car that won't break the BIK bank while at the same time being at least somewhat interesting to drive. It's a shame the i8's and Tesla's are so expensive. We could do with a nice performance orientated hybrid or EV in the £30-£50k price range.

Guvernator said:
Sounds like a no brainer to me so not sure why it's mostly frowned on? Does the fact that I may also use the car for occasional private use, say about 2000 miles per year have any baring or is this a no no?
You are looking at it in a slightly simplistic way.All this company pays/ I pay business is implying that if the company pays for something then it doesn't affect you at all.
Assuming your company is all yours, then it's still your money.
Im not saying that you're wrong, Im just saying that company money is not free money as you seem to imply.
Also, I am extremely surprised that in a business like your you only clock up 5000 miles PA

blindswelledrat said:
You are looking at it in a slightly simplistic way.
All this company pays/ I pay business is implying that if the company pays for something then it doesn't affect you at all.
Assuming your company is all yours, then it's still your money.
Im not saying that you're wrong, Im just saying that company money is not free money as you seem to imply.
True, it is all your money. But, crucially, company money can be spent *before* the taxman gets his hands on it, whereas personal money is money that is left over *after* the taxman has been at it. All this company pays/ I pay business is implying that if the company pays for something then it doesn't affect you at all.
Assuming your company is all yours, then it's still your money.
Im not saying that you're wrong, Im just saying that company money is not free money as you seem to imply.

(Obviously that's an overly simplistic representation, but you get the idea)
JonRB said:
True, it is all your money. But, crucially, company money can be spent *before* the taxman gets his hands on it, whereas personal money is money that is left over *after* the taxman has been at it. 
(Obviously that's an overly simplistic representation, but you get the idea)
Agreed. It's just very complicated, particularly when you are utilising dividends and things. It becomes extremely difficult to say exactly how much money buying something through the company equates to when compared with post-tax salary
(Obviously that's an overly simplistic representation, but you get the idea)
blindswelledrat said:
Agreed. It's just very complicated, particularly when you are utilising dividends and things. It becomes extremely difficult to say exactly how much money buying something through the company equates to when compared with post-tax salary
Oh, absolutely. I totally agree. 
I know it's not free money, at the end of the day I know I am paying, be it personally or through the company but either way, I have to pay for a car anyway. The advantage of paying it through the company is that it uses pre-tax turnover rather than post tax earnings so there is some tax saving to be had. However even if I were to just break even, it would still be preferable as it allows me to use surplus company funds which would otherwise just sit there earning bugger all interest (I'm not interested in the complications of investing the money at this time).
This would then allow me to use any personal funds saved to do something else more interesting than paying for a work car, like buying something a bit more interesting for the weekend.
The reason why I don't do more mileage in my business (not sure how you know what that is unless you've been stalking me
) is that I live in London and and most of my clients are based in London so I'm not traipsing up and down the country doing galactic miles. Besides a lot of the time I am working remotely from my home office anyway.
How do you work out the extra NI that the company has to pay, is this based on the BIK?
This would then allow me to use any personal funds saved to do something else more interesting than paying for a work car, like buying something a bit more interesting for the weekend.
The reason why I don't do more mileage in my business (not sure how you know what that is unless you've been stalking me
) is that I live in London and and most of my clients are based in London so I'm not traipsing up and down the country doing galactic miles. Besides a lot of the time I am working remotely from my home office anyway.How do you work out the extra NI that the company has to pay, is this based on the BIK?
Yes.
First of all work out the BIK value of the benefit. Then multiply that by 13.8%. That is the Class 4 amount you will have to pay each year.
There's 36 pages of guidance here for you to read -
https://www.gov.uk/government/uploads/system/uploa...
First of all work out the BIK value of the benefit. Then multiply that by 13.8%. That is the Class 4 amount you will have to pay each year.
There's 36 pages of guidance here for you to read -
https://www.gov.uk/government/uploads/system/uploa...
Eric Mc said:
Yes.
First of all work out the BIK value of the benefit. Then multiply that by 13.8%. That is the Class 4 amount you will have to pay each year.
There's 36 pages of guidance here for you to read -
https://www.gov.uk/government/uploads/system/uploa...
Thanks Eric First of all work out the BIK value of the benefit. Then multiply that by 13.8%. That is the Class 4 amount you will have to pay each year.
There's 36 pages of guidance here for you to read -
https://www.gov.uk/government/uploads/system/uploa...
Some light bed time reading too

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