Tax on a hybrid car leased through a limited company

johnfizz

Hi all.

I am not familiar with the current legislation, however my accountant advised me against leasing a car for personal use through my limited company, saying that it will cost me a lot of extra personal income tax.

I have had a look on the internet and I still am very confused about how it works. I would appreciate if someone could be so kind and please give me some real-world example of how much would it cost me personally and my business to lease a car and use it personally.

Let's say my company's income is £100,000 per year. I am VAT registered.
That's £20,000 to be paid in corporation tax.
Let's say I am a basic tax rate payer, taxed at 20%.
I want to lease a VW Golf GTE, priced at £29,980, but let's say it's £30,000 for the ease of calculation.
It's CO2 emissions are 40 g/km.
I have found a lease deal for 24 months at £220 (+ £45 VAT) per month with a £640 upfront payment.

My understanding is that I will be able to deduct the leasing cost from my corporation tax, and 50% of VAT as well. But that doesn't mean anything to me really Could someone please explain me how much would my company actually pay for the car in the first year and how much tax would it save as well as what impact would the car have on my personal tax affairs?

Thank you!

Pennywise

It will cost you personal tax of between £1k-£2k per year.

The company tax saving will be about half that.

The general rule is that company cars aren't worth it for owners of their own limited companies, unless you're looking at the cheaper end of the scale or zero emissions.