Personal / Business Lease
Discussion
Myself and the other 2 directors of my company are looking to take out leases on 3 cars next year.
I would be looking at something like a BMW 340i, another would be something like a LR Discovery and the other guy is not a car man at all and will probably go with something like an Audi A3. The idea being that we would have a budget for each car and then each individual will have the choice to top this up using their own money should they so wish. From my understanding a personal lease wouldn't be classed as a company car and wouldn't be subject to CC tax where as a business lease would push us down this route. We would be able to claim 50% of the VAT back on a business lease but not so on a personal.
Are there any other factors to take into consideration?
I would be looking at something like a BMW 340i, another would be something like a LR Discovery and the other guy is not a car man at all and will probably go with something like an Audi A3. The idea being that we would have a budget for each car and then each individual will have the choice to top this up using their own money should they so wish. From my understanding a personal lease wouldn't be classed as a company car and wouldn't be subject to CC tax where as a business lease would push us down this route. We would be able to claim 50% of the VAT back on a business lease but not so on a personal.
Are there any other factors to take into consideration?
On the business lease my understanding is that would be seen as a BIK and as such there will be tax implications for you (the directors). These rates are well published online and the subsequent tax liability can be calculated. there are calculators online that'll do this for you though.
With a personal lease, this wouldn't apply, from how i understand it. You may have something like a car allowance from the company that would simply be a cash payment as a top up for your salary or whatever, and how you address this is up to you, be it as income or based on dividends at year end.
I've looked into it recently with my company and have gone the route of just paying myself cash, albeit i did end up buying a top end Amarok on the business as this was very tax efficient (VAT claimed back and offset the purchase cost against corporation tax which was a fairly large number).
With a personal lease, this wouldn't apply, from how i understand it. You may have something like a car allowance from the company that would simply be a cash payment as a top up for your salary or whatever, and how you address this is up to you, be it as income or based on dividends at year end.
I've looked into it recently with my company and have gone the route of just paying myself cash, albeit i did end up buying a top end Amarok on the business as this was very tax efficient (VAT claimed back and offset the purchase cost against corporation tax which was a fairly large number).
The only difference between a personal lease and a business lease is who enters into the agreement with lease company.
Company cars only really work for people who are willing to run something cheap and economical.
BIK will be substantial on a 340i (£7240 per year) and a Discovery (£9426 for a 3.0 HSE). I've assumed you're all 40% taxpayers.
You can't take a personal lease and pay it directly with company money - you would have to pay yourselves additional salary or car allowance which would be subject to tax and NI.
If we run the BMW as an example and make it cost-neutral to you as the end user:
Base M340i xDrive Saloon on 3+35, 10K miles terms
Business Lease- £533.02 + 50% VAT = £586.32 - 36 month total £21107.52
BIK - £21720. To increase your take home pay equal to the BIK you'll need to pay yourself an extra £12500 pa, or £37500 over 3 years, plus employers NI at 13.8% = £5175
Total Cost to the Business: £63782.52
Personal - £639.62 inc VAT - 36 month total £23026.32
To increase your take home to cover the lease costs, you'll need an uplift of £13200pa, or £39600 over 3 years, plus employers NI of £5464.80.
Total cost to the Business: £45064.80
Company cars only really work for people who are willing to run something cheap and economical.
BIK will be substantial on a 340i (£7240 per year) and a Discovery (£9426 for a 3.0 HSE). I've assumed you're all 40% taxpayers.
You can't take a personal lease and pay it directly with company money - you would have to pay yourselves additional salary or car allowance which would be subject to tax and NI.
If we run the BMW as an example and make it cost-neutral to you as the end user:
Base M340i xDrive Saloon on 3+35, 10K miles terms
Business Lease- £533.02 + 50% VAT = £586.32 - 36 month total £21107.52
BIK - £21720. To increase your take home pay equal to the BIK you'll need to pay yourself an extra £12500 pa, or £37500 over 3 years, plus employers NI at 13.8% = £5175
Total Cost to the Business: £63782.52
Personal - £639.62 inc VAT - 36 month total £23026.32
To increase your take home to cover the lease costs, you'll need an uplift of £13200pa, or £39600 over 3 years, plus employers NI of £5464.80.
Total cost to the Business: £45064.80
I have done the same thing in my company a few years ago.
I would take an allowance, get a personal lease, not worry about diesel as you will be claiming back mileage and at the end of the year be able to claim tax relief on all business mileage and no co car tax to boot.
You also have the flexibility to change your car when you want.
I would take an allowance, get a personal lease, not worry about diesel as you will be claiming back mileage and at the end of the year be able to claim tax relief on all business mileage and no co car tax to boot.
You also have the flexibility to change your car when you want.
OP, not sure if it is covered by the replies above, but when I was in a Big4 until recently we had a "salary sacrifice" scheme which could be used for vehicle leasing. Comes off top line, pre-tax. Admittedly the rates weren't that great (when compared to a standard HP or even to some of our international colleagues) but the BIK was included in the lease fee itself which might explain it, and was reflected on the P60.
That said, I do recall scoffing at the fact that an A6 was just over £2k a month, so not sure if it's that helpful, but raise it with your accountant when you chat to them.
That said, I do recall scoffing at the fact that an A6 was just over £2k a month, so not sure if it's that helpful, but raise it with your accountant when you chat to them.
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