Buying an EV via a Ltd company
Discussion
I've heard there are some benefits for buying an EV through a ltd company. Has anyone done this for an outright cash purchase? I'm wondering how much can I expect to save exactly in money terms?
Let's say 40k. Bought 1st May 2019.
I could buy it and rent it back to myself is that right? I've heard the term BIK but no idea what it means.
Edited by anonymous-user on Monday 29th April 22:30
SOL111 said:
Unfortunately you can't claim any of the vat on a purchase. Only if you're leasing. Iirc vat only applies to very specific scenarios (taxi drivers for instance, iirc).
You can only claim the CT, which can be claimed in full in the first year.
So in terms of CT, 40k x 0.19 is £7.6k. If I don't sell the car anytime soon?You can only claim the CT, which can be claimed in full in the first year.
Then BIK. 40 x 0.16 is 6.4k. I pay income tax on that figure? Where does the 6.4 come from and go to?
Still seems odd this is allowed for 100% personal use. Shouldn't all expenses be for exclusive use by the business?
Edited by anonymous-user on Thursday 25th April 22:48
EddieSteadyGo said:
You are multiplying the RRP value of the car by HMRC's BIK percentage. This gives the value of the 'benefit in kind' you are receiving as an individual, being given a company car. In your example, this is £6,400.
You multiply this figure by your nominal tax rate e.g. 20% or 40%. So if you are a higher rate tax payer you would pay circa £213 per month in additional tax for gaining the use of a company car.
Your company will also need to pay national insurance on the BIK benefit given to you as its employee.
As was discussed on the other thread a few days ago, this method doesn't make a lot of sense until April next year when the BIK percentage rate for EVs drops to 2%.
At that point, the £6,400 value of the benefit reduces to £800. So your individual tax would reduce to £27 / month, if you were a higher rate tax payer.
You can also charge the normal expenses for running the car like insurance, maintenance, tyres etc to your company, so these are effectively paid out of untaxed income.
Overall, unless you are happy to pay the extra tax now, I'd wait until next April before receiving the car. Then just decide with your accountant whether it makes sense to lease the car (which allows half of the VAT to be reclaimed) or for the company to buy the car.
Either of these two options will likely be much cheaper than buying an EV as an individual out of your taxed personal income.
Thanks a lot. That's super clear. You multiply this figure by your nominal tax rate e.g. 20% or 40%. So if you are a higher rate tax payer you would pay circa £213 per month in additional tax for gaining the use of a company car.
Your company will also need to pay national insurance on the BIK benefit given to you as its employee.
As was discussed on the other thread a few days ago, this method doesn't make a lot of sense until April next year when the BIK percentage rate for EVs drops to 2%.
At that point, the £6,400 value of the benefit reduces to £800. So your individual tax would reduce to £27 / month, if you were a higher rate tax payer.
You can also charge the normal expenses for running the car like insurance, maintenance, tyres etc to your company, so these are effectively paid out of untaxed income.
Overall, unless you are happy to pay the extra tax now, I'd wait until next April before receiving the car. Then just decide with your accountant whether it makes sense to lease the car (which allows half of the VAT to be reclaimed) or for the company to buy the car.
Either of these two options will likely be much cheaper than buying an EV as an individual out of your taxed personal income.
Wow I was expecting something like high 3 figure savings, so this sounds like a no brainer.
Assuming company cars are eligible for the incentive, that means from April, buying a base model 3 for 39k looks something like this?
39k
- 3.5k (tax incentive)
- 7.6k (ct tax avoided)
= 27.9k
Then it sounds like 2% BIK is at partly balanced by income tax savings on expenses.
If gov wants to incent EVs they should expand to personal purchases too!?
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
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
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
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