Buying car in own name vs company name

ukri

I think I’ve done the numbers correctly and it’s clearly better to just buy in my personal name but thought I’d check.

I am a sole company director, looking to buy a used PHEV car. Very rough numbers-

Cost - 10k
List value (for P11D) - 30k
BIK % - 12%
Capital allowance - 18% annually
Personal marginal income tax rate - 20% (I retain cash in the company or pay into a SIPP, never step into the 40% band)

BUYING PERSONALLY
- I take out dividends of 10k to buy the car
- this costs me £750 in personal income tax one time only

BUYING IN CO NAME
- saves about £350 in corp tax every year for 5.5years through the WDV
- costs £500 annually in Class 1A NI
- Costs extra income tax (BIK) of £700 annually
- nets out to cost me about £850 annually just to keep the car

It looks like a no brainier to just buy it in my personal name right? Rough numbers aside, have I missed anything obvious?

Grateful for any thoughts.

Dazed_and_C0nfused

Is the £10k dividend extra or the total for the tax year in question?

[Deleted User]

It is one thing to purchase the car - what about running costs? You won’t get tax relief on these but the company will. Perhaps you should incorporate these into your sums also?

ukri

[Deleted User] said:

It is one thing to purchase the car - what about running costs? You won’t get tax relief on these but the company will. Perhaps you should incorporate these into your sums also?

Thank you, I didn’t think about that. It’s a Kia with 4 years left on the warranty so I don’t expect much in the way of running costs. But even assuming annual insurance and maintenance costs of (say) £1,000 that equates to a corp tax saving of less than £200 I suppose. 

ukri

Dazed_and_C0nfused said:

Is the £10k dividend extra or the total for the tax year in question?

I’m not sure what the answer is to that question tbh. In reality, I’m just going to use £6k from selling my current car and £4k from savings to make the purchase. And continue to take Sal + divs of (roughly) 9k + 41k as I do every year. So I won’t actually be taking out any more than I usually would.

macman

Is your company VAT-registered?

Grumpy_chap

In the assessment of tax liabilities for the car as a personally-owned vehicle, the OP does not seem to have taken into account the corporation tax that is payable before that £10k can be drawn from the company as a dividend and then subject to the 7.5% income tax.

As @[Deleted User] mentioned, deciding how the on-going running costs, fuel etc will be accounted for is also a significant factor in the decision between personal car and company car.

Beyond that, the choice of car might be influenced differently depending upon which route the car ownership is to take.  A brand new electric car is a different proposition as a company car than a used PHEV.  The electric option may not suit the OP's budget or needs, but I am just mentioning the options for a point of consideration.

This is quite an involved subject, so the best thing is possibly to choose an exact car and then make the decision between company or private ownership.

ukri

Thanks all. I went for it in my personal name eventually to keep things simple on the company’s side, it’s been great so far