Ltd Company Car Lease

Fromdownwest

After some advice on a car lease, please.

I am currently paying my car lease as a personal lease.

I am looking at moving to a full EV, and would like some thoughts, please.

P11D Value - £49,725
BIK £995 going up to £1,989 26/27

Monthly lease costs of £475

Current pay is £50,270
Net profit circa £100k

I like the idea of not having to take £5,700 as income to pay the lease on a personal basis, so could 'save' more of the £50,270 into my ISA each month.

Just trying to figure out if the benefits outweigh the additional costs.

I used the car for business (non Trade) with out 70% business use. Would this be an issue?
Also, could I claim for charging the car at home ( business registered at home)

Thanks in advance

DullGreyGuy

Is the lease cost inc or exc of VAT? As a company car you'd be able to recover 50% of the VAT. 

The business/personal split on the vehicle doesn't matter, its a business expense in the same way any staff incentive is, VAT is capped at 50% on the basis its a split asset and you pay the BIK for the personal use. 

You can still claim mileage if you are personally paying for the fuel. At present the simplified method is 7p/mile which may be easier than working out how much electricity you've used for each trip etc. 

Fromdownwest

Thanks, I am not VAT registered due to the nature of my business.

Savvy_Sue

What does your accountant say?

Hoenir

There's also a Class 1a NIC charge to be factored in on the BIK. 

Grumpy_chap

Fromdownwest said:

After some advice on a car lease, please.

I am currently paying my car lease as a personal lease.

I am looking at moving to a full EV, and would like some thoughts, please.

P11D Value - £49,725
BIK £995 going up to £1,989 26/27

Monthly lease costs of £475

Current pay is £50,270
Net profit circa £100k

I like the idea of not having to take £5,700 as income to pay the lease on a personal basis, so could 'save' more of the £50,270 into my ISA each month.

Just trying to figure out if the benefits outweigh the additional costs.

I used the car for business (non Trade) with out 70% business use. Would this be an issue?
Also, could I claim for charging the car at home ( business registered at home)

Thanks in advance

Why are you looking to lease the EV?
How do you currently draw the £100k profit?

You could buy the (brand new) EV from the company funds and currently claim full first year write-down so that results in a £50k (or whatever after discount) reduction in the profit so less corporation tax this accounting period.

You will suffer BIK on the EV which, based on current rules, is low as you have noted.  You might be worth reducing the salary drawn slightly so that salary + BIK remains basic rate.

You cannot claim the cost of charging at home, but can claim "fuel" mileage rate (AFR) = 7 pence per mile from 1st September.
https://www.gov.uk/guidance/advisory-fuel-rates

As an aside, has your Accountant determined the salary you draw?  Many people would find a lower salary and higher dividend to be more tax efficient.

What has your Accountant advised for the best way to finance the car?

Fromdownwest

Thanks for the detailed reply.

I currently draw £12,570 as PAYE plus £37,700 as Dividends.

The rest of the profit is retained in the business, or as an employer pension contribution.

They have been quite vague on the preferential way. Both sides have advantages etc. 

Grumpy_chap

Fromdownwest said:

Thanks for the detailed reply.

I currently draw £12,570 as PAYE plus £37,700 as Dividends.

The rest of the profit is retained in the business, or as an employer pension contribution.

They have been quite vague on the preferential way. Both sides have advantages etc. 

The Accountant should be able to set out the figures for each route very easily.  You can then assess the pros and cons of each route and take a decision.

What I'd do (indeed, have done) would be to buy the EV outright as a company vehicle and then suffer the low rate of BIK.  May change if the tax rules change. 

Fromdownwest

Grumpy_chap said:

Fromdownwest said:

Thanks for the detailed reply.

I currently draw £12,570 as PAYE plus £37,700 as Dividends.

The rest of the profit is retained in the business, or as an employer pension contribution.

They have been quite vague on the preferential way. Both sides have advantages etc. 

The Accountant should be able to set out the figures for each route very easily.  You can then assess the pros and cons of each route and take a decision.

What I'd do (indeed, have done) would be to buy the EV outright as a company vehicle and then suffer the low rate of BIK.  May change if the tax rules change. 

Thanks for the reply, I did consider that, I just do not want to carry the depreciation of the car. Or would the offset Corp tax negate this?

Grumpy_chap

Fromdownwest said:

 I just do not want to carry the depreciation of the car. Or would the offset Corp tax negate this?

One way or the other you have to carry the cost of the depreciation. 
What varies between finance models is how much of the risk / gain on the depreciation being high / lower falls to you or to others.
Your Accountant should be able to assess the tax position between various finance models, specific to your circumstances, rather than any comment that can be made in the forum which is only ever able to point out generic variances.