Most tax efficient way to buy a car?

dasachmo

Hi everyone. I just wanted to ask what the most tax efficient way to buy a second hand car is. The Co2 emissions are 52g and I have the option of buying as a sole trader or in a limited company where I am the director. 
I've asked my accountant but I didn't understand the BIK vs deductions as a sole trader. 
Thank you in advance 

Jeremy535897

dasachmo said:

Hi everyone. I just wanted to ask what the most tax efficient way to buy a second hand car is. The Co2 emissions are 52g and I have the option of buying as a sole trader or in a limited company where I am the director. 
I've asked my accountant but I didn't understand the BIK vs deductions as a sole trader. 
Thank you in advance 

If you've already paid your accountant to tell you, and you don't understand the answer, it would be better to seek clarification from them.

Petriix

Also, have you looked at getting a new EV? The BIK is zero, rising to 1% then 2% from April 2022. Your company could lease it, or even buy it with 100% year 1 capital allowance.

zemarcopolo

Buying as a company director will not be good for tax purposes. 
HMRC will consider that your company is giving you benefit in kind. They will estimate the monetary value of the benefit in kind depending on CO2 emission of the car then you will have to pay tax on the estimated value. If you are buying a new electric vehicle the emission is zero so you can save BIK cost.

If you buy as a sole trader and use the vehicle for non commercial activities, I think the BIK will apply. 

Your accountant should help you with calculations on how much tax you save on expenses for the purchase/loan vs the amount you pay BIK. Put three columns; 1) purchase as an individual 2) company purchase 3) sole trader. In each, estimate total cost by adding BIK (where applicable) to price of the car then minus tax savings.  

Grumpy_chap

On the face of it, the OP has chosen a specific car to purchase (CO2 known) and has three options to acquire:

• personal vehicle
• sole-trader business
• Ltd Co business

This is a very easy item for the Accountant to assess the three options, even if worked back beyond cost in pound notes to cost in hours worked to pay for it.  The OP should ask the Accountant to clarify the queries that remain.

It is possible that the OP / Accountant is over-thinking the issue and / or the outcome is rather marginal, given variable factors:

• Is the same finance rate available for company purchase?
• Is the same insurance rate available for company purchase?
• How will the OP manage fuel / mileage costs after the vehicle is purchased?  What is the assumed mileage used in calculations?  Maybe, at 10k business miles it works one way and at 15k business miles another option is more favourable.
• What assumed service, maintenance, costs will be used?  Does changing this flip the balance in the way to purchase?

Maybe the answer has not come out as the OP expected.
Maybe some parts of the assessment seem unfair (BIK assessed on value for new car even though a used car 
All the OP can do is to set out a basis to do the assessment, let the Accountant work those numbers (with fixed assumptions across all three options) and then take a decision.  If the different options work out marginal, then it becomes a preference.

It certainly is not possible to simply apply carte-blanche statements such as:

zemarcopolo said:

Buying as a company director will not be good for tax purposes. 

[Deleted User]

It is also completely incorrect to state that BIK applies to the self-employed in any circumstances.

Grumpy_chap

The OP may find the following article helpful:
https://www.itcontracting.com/company-car-expenses-contractors/
There are other similar guides available, but this one seems to keep it all simple and plain English.

Dazed_and_C0nfused

[Deleted User] said:

It is also completely incorrect to state that BIK applies to the self-employed in any circumstances.

Spot on.

Although experience shows lots of the so called self employed people who post on here aren't self employed at all 🥺

Grumpy_chap

Dazed_and_C0nfused said:

Although experience shows lots of the so called self employed people who post on here aren't self employed at all 🥺

The OP in this case would appear to know the difference as they state they can buy the car either as a sole trader, or through their Ltd Co.  The OP has not said why they have both sole trader and Ltd Co businesses, but there could be good reasons.  

Of course, the OP could buy the car personally in either case and simply charge mileage at the appropriate AMAP rates to whichever of their business is incurring the business mileage.  In fact, where the structure is more complex, the simplest solution can sometimes be the best.  Indeed, there could be extra complexity if the vehicle is acquired as a company car via the Ltd Co and then the OP does business mileage through the sole trader business.

dasachmo

Ah great, thank you for the responses. 
So after speaking to my accountant - she's advised not to buy through the company as the BIK rate is 13% - the CO2 is 52g
She just a bit unsure about the writing down allowances if the car is bought second hand. I've seen two cars - one is below 50g and one is above it but they are both second hand and im not sure if they are entitled to first year allowance (claiming 100%). She thought it was if its newly purchased but it doesnt seem so as im buying it second hand. 

[Deleted User]

No FYA if second hand.

https://www.gov.uk/capital-allowances/business-cars