First company car

Jaco70

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. 

Bookworm105

your questions have factual answers you can look up and have calculated for you

Benefit-in-kind (BIK) company car tax bands 2022 - 2028

Fleet and company car tax explained and BIK rates from 2024 to 2028 | What Car?

VED V149

DullGreyGuy

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 year	following
£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

DullGreyGuy 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 year	following
£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

Jaco70 said:

DullGreyGuy 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 year	following
£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

TheSpectator said:

Jaco70 said:

DullGreyGuy 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 year	following
£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

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

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

Grumpy_chap said:

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

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

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.