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First company car

Have owned a small business for many years, but never had a company car. I drive a small company-owned van, and we have a personally owned car for my wife.

Am considering buying a used car on the company, but struggling to find out the likely cost implications. 

The reason for considering this is to avoid having to fund the purchase out of personal money, but unsure how much myself and/or the company will have to pay in additional tax.

I am considering a plug in hybrid Range Rover, year 2020, cost around £40 - £45k, although I realise that HMRC will likely calculate tax based on the much higher new list price.

I would never have given any thought to buying a ‘gas guzzler’ on the company, but I’ve heard that the BIK on hybrids is way lower, although I don’t really know any thing more concrete than that.

I’m also happy to pay personally for fuel, RFL, insurance, maintenance etc, if that cuts the bill to HMRC. 
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Comments

  • Bookworm105
    Bookworm105 Posts: 1,236 Forumite
    1,000 Posts Name Dropper
    edited 30 October at 2:15PM
  • DullGreyGuy
    DullGreyGuy Posts: 13,923 Forumite
    10,000 Posts Second Anniversary Name Dropper
    Jaco70 said:
    Have owned a small business for many years, but never had a company car. I drive a small company-owned van, and we have a personally owned car for my wife.

    Am considering buying a used car on the company, but struggling to find out the likely cost implications. 

    The reason for considering this is to avoid having to fund the purchase out of personal money, but unsure how much myself and/or the company will have to pay in additional tax.

    I am considering a plug in hybrid Range Rover, year 2020, cost around £40 - £45k, although I realise that HMRC will likely calculate tax based on the much higher new list price.

    I would never have given any thought to buying a ‘gas guzzler’ on the company, but I’ve heard that the BIK on hybrids is way lower, although I don’t really know any thing more concrete than that.

    I’m also happy to pay personally for fuel, RFL, insurance, maintenance etc, if that cuts the bill to HMRC. 
    BIK is based on the manufacturers list price so if you went for a P460e HSE with absolutely no optional extras you'd effectively be adding the following amounts to your salary for both the calculation of both Employers and Employee NI and income tax:

    this year next yearfollowing
    £6,074£7,288£8,503

    Obviously no car has no optional extras so you-ll be adding 5% - 7% of the original list price of those on top of the above. 

    No point paying for RFL, insurance and maintanence yourself, they wouldn't increase you personal taxes and would reduce the profits/corporation tax as its maintaining a company asset. 

    Fuel would be a separate calculation. 

    Depending on how you finance the purchase will dictate treatment of the purchase of the vehicle itself
  • Jaco70
    Jaco70 Posts: 203 Forumite
    Fourth Anniversary 100 Posts
    Jaco70 said:
    Have owned a small business for many years, but never had a company car. I drive a small company-owned van, and we have a personally owned car for my wife.

    Am considering buying a used car on the company, but struggling to find out the likely cost implications. 

    The reason for considering this is to avoid having to fund the purchase out of personal money, but unsure how much myself and/or the company will have to pay in additional tax.

    I am considering a plug in hybrid Range Rover, year 2020, cost around £40 - £45k, although I realise that HMRC will likely calculate tax based on the much higher new list price.

    I would never have given any thought to buying a ‘gas guzzler’ on the company, but I’ve heard that the BIK on hybrids is way lower, although I don’t really know any thing more concrete than that.

    I’m also happy to pay personally for fuel, RFL, insurance, maintenance etc, if that cuts the bill to HMRC. 
    BIK is based on the manufacturers list price so if you went for a P460e HSE with absolutely no optional extras you'd effectively be adding the following amounts to your salary for both the calculation of both Employers and Employee NI and income tax:

    this year next yearfollowing
    £6,074£7,288£8,503

    Obviously no car has no optional extras so you-ll be adding 5% - 7% of the original list price of those on top of the above. 

    No point paying for RFL, insurance and maintanence yourself, they wouldn't increase you personal taxes and would reduce the profits/corporation tax as its maintaining a company asset. 

    Fuel would be a separate calculation. 

    Depending on how you finance the purchase will dictate treatment of the purchase of the vehicle itself

    Thanks for that, that’s really detailed and simple to understand.

    So, basically, taking year three onwards, tax would be 40% on £8503, so in the region of £3500 extra personal tax per year? Which doesn’t sound too bad to be honest.

    Would there be any additional tax for the business to pay? And would I be right in thinking that purchasing a car wouldn’t be offset against corporation tax?
  • TheSpectator
    TheSpectator Posts: 100 Forumite
    100 Posts
    edited 30 October at 4:11PM
    Jaco70 said:
    Jaco70 said:
    Have owned a small business for many years, but never had a company car. I drive a small company-owned van, and we have a personally owned car for my wife.

    Am considering buying a used car on the company, but struggling to find out the likely cost implications. 

    The reason for considering this is to avoid having to fund the purchase out of personal money, but unsure how much myself and/or the company will have to pay in additional tax.

    I am considering a plug in hybrid Range Rover, year 2020, cost around £40 - £45k, although I realise that HMRC will likely calculate tax based on the much higher new list price.

    I would never have given any thought to buying a ‘gas guzzler’ on the company, but I’ve heard that the BIK on hybrids is way lower, although I don’t really know any thing more concrete than that.

    I’m also happy to pay personally for fuel, RFL, insurance, maintenance etc, if that cuts the bill to HMRC. 
    BIK is based on the manufacturers list price so if you went for a P460e HSE with absolutely no optional extras you'd effectively be adding the following amounts to your salary for both the calculation of both Employers and Employee NI and income tax:

    this year next yearfollowing
    £6,074£7,288£8,503

    Obviously no car has no optional extras so you-ll be adding 5% - 7% of the original list price of those on top of the above. 

    No point paying for RFL, insurance and maintanence yourself, they wouldn't increase you personal taxes and would reduce the profits/corporation tax as its maintaining a company asset. 

    Fuel would be a separate calculation. 

    Depending on how you finance the purchase will dictate treatment of the purchase of the vehicle itself

    Thanks for that, that’s really detailed and simple to understand.

    So, basically, taking year three onwards, tax would be 40% on £8503, so in the region of £3500 extra personal tax per year? Which doesn’t sound too bad to be honest.

    Would there be any additional tax for the business to pay? And would I be right in thinking that purchasing a car wouldn’t be offset against corporation tax?
    If the company is also paying for fuel you will have a have a potential fuel benefit.

    The company will also pay Class 1A NIC on the BIK.

    You are in the realms of capital allowances in respect of CT deductions. Don't you have an accountant to advise you on this? 
  • Jaco70
    Jaco70 Posts: 203 Forumite
    Fourth Anniversary 100 Posts
    Jaco70 said:
    Jaco70 said:
    Have owned a small business for many years, but never had a company car. I drive a small company-owned van, and we have a personally owned car for my wife.

    Am considering buying a used car on the company, but struggling to find out the likely cost implications. 

    The reason for considering this is to avoid having to fund the purchase out of personal money, but unsure how much myself and/or the company will have to pay in additional tax.

    I am considering a plug in hybrid Range Rover, year 2020, cost around £40 - £45k, although I realise that HMRC will likely calculate tax based on the much higher new list price.

    I would never have given any thought to buying a ‘gas guzzler’ on the company, but I’ve heard that the BIK on hybrids is way lower, although I don’t really know any thing more concrete than that.

    I’m also happy to pay personally for fuel, RFL, insurance, maintenance etc, if that cuts the bill to HMRC. 
    BIK is based on the manufacturers list price so if you went for a P460e HSE with absolutely no optional extras you'd effectively be adding the following amounts to your salary for both the calculation of both Employers and Employee NI and income tax:

    this year next yearfollowing
    £6,074£7,288£8,503

    Obviously no car has no optional extras so you-ll be adding 5% - 7% of the original list price of those on top of the above. 

    No point paying for RFL, insurance and maintanence yourself, they wouldn't increase you personal taxes and would reduce the profits/corporation tax as its maintaining a company asset. 

    Fuel would be a separate calculation. 

    Depending on how you finance the purchase will dictate treatment of the purchase of the vehicle itself

    Thanks for that, that’s really detailed and simple to understand.

    So, basically, taking year three onwards, tax would be 40% on £8503, so in the region of £3500 extra personal tax per year? Which doesn’t sound too bad to be honest.

    Would there be any additional tax for the business to pay? And would I be right in thinking that purchasing a car wouldn’t be offset against corporation tax?
    If the company is also paying for fuel you will have a have a potential fuel benefit.

    The company will also pay Class 1A NIC on the BIK.

    You are in the realms of capital allowances in respect of CT deductions. Don't you have an accountant to advise you on this? 
    Yes I do, but I always find its easy to get advice on here before I bother him about it, especially on something speculative like this.

    The answers have been really helpful and I’ve now realised that newer models have much lower BIK, due to having a better electric range. I wasn’t aware how it was calculated, and googling it didn’t really give me the answer I needed (I’m aware Google has all the answers, I just wasn’t sure what question to ask).

    I’m definitely not in the position to spend 100k on a car, so I think I have my answer.

    Thanks again for the advice 👍
  • DullGreyGuy
    DullGreyGuy Posts: 13,923 Forumite
    10,000 Posts Second Anniversary Name Dropper
    I'd look at if there are other options, eg leasing, to get prices and then speak to your accountant. If you were to lease rather than buy then you can recover 50% of the vat and the net payments are OpEx. If you want to make it a CapEx and just buy it outright you probably already have the numbers so the accountant can say which is best for you. How you fund it won't change the income tax and NI
  • Grumpy_chap
    Grumpy_chap Posts: 16,225 Forumite
    Tenth Anniversary 10,000 Posts Name Dropper Combo Breaker
    edited 31 October at 10:59AM
    Instead of a £45k used money put gas guzzler, if the OP chooses an EV, the BIK will be lower and better capital allowances claim on a brand new vehicle 
  • Jaco70
    Jaco70 Posts: 203 Forumite
    Fourth Anniversary 100 Posts
    Instead of a £45k used money put gas guzzler, if the OP chooses an EV, the BIK will be lower and better capital allowances claim on a brand new vehicle 
    Thanks for that Grumpy chap. I sort of already understood that, as my sister has a company Mercedes EV, and she said the costs of ownership are negligible.
    However, I just fancied a Range Rover, rather than actually needing one, and I’m not quite ready to take the leap to pure electric when we only have one car in the household. 
  • mlz1413
    mlz1413 Posts: 2,922 Forumite
    Part of the Furniture 1,000 Posts Combo Breaker
    Can you take the money as a dividend and buy the car as a personal vehicle,  so no BIK ?
    Tax on dividend is only once rather than yearly.

  • Savvy_Sue
    Savvy_Sue Posts: 46,538 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    Jaco70 said:

    However, I just fancied a Range Rover,
    Fancy away, but round my neck of the woods there are regular 'attacks' on vehicles like this, with the tyres slashed overnight, and sometimes messages daubed on the paintwork. Even larger electric and hybrid vehicles have been treated in this way. I suppose if you're operating at dead of night and trying to avoid detection it may be hard to distinguish one large car from another: either that or they really don't care. 

    It's not right, and no I'm not one of the perpetrators, but having what's perceived as an oversized car in an overcrowded city comes with risks. 

    Of course if you're out in the country and / or with secure parking, the risks diminish. 
    Signature removed for peace of mind
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