Company Car Tax Explained UK - April 2020 & Beyond
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- เผยแพร่เมื่อ 3 ก.ค. 2024
- 🔴 There are several ways to gain company car tax relief, including methods such as getting a pool car or buying/leasing a fully electric or hybrid PHEV vehicle with a long electric range......
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⏱️ Time Stamps:
1:32 - Should you lease or buy a company car through your limited company?
2:30 - The limited company tax implications of a company car.
3:22 - The personal benefit in kind (BIK) implications of a company car.
4:17 - A useful company car benefit (BIK) calculator.
09:23 - What About VAT?
10:00 - How to Pay 0% Tax On Your Company Car
11:10 - What's The Alternative To Buying or Leasing A Company Car?
11:30 - Recap
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If you are operating through a Limited Company then the tax efficient way of getting a company car is simply to get one with very low or 0 Co2 emissions per g/km. The higher the Co2 emissions per g/km, the more onerous company car tax becomes for both the company and particularly you the user personally.
A benefit in kind charge is essentially a tax levied on you personally, for using a business asset like your company car for personal use. HMRC's stance is that most business assets used personally by the owner or employees should be taxed as a benefit in kind.
The benefit in kind charge is computed as follows:
P11D Value (list price + optional extras, VAT & delivery) x BIK rates x Co2 g/km emissions
A key consideration aside from company car tax is cashflow, whether to buy a car outright or to lease it through what is known as an operating lease. There are different tax implications for each route explained in the video.
As a business owner, if buying or leasing a company car does not add up for you, then you can use your personal vehicle for business usage and claim Mileage Allowance Payments. For the first
10,000 business miles, you can claim 45p per mile, and 25p per mile for any miles over and above. You can physically withdraw this money from your company tax free, there is no BIK charge and your company can offset this for corporation tax relief.
We've done a video on the Mileage Allowance Payments as follows:
🔴 • How To Claim Mileage A...
At present, in the 2020-21 tax year, in order to pay 0% company car tax (and no benefit in kind) is to get a fully electric vehicle that naturally has Co2 emissions of 0 g/km or a low emissions (less than 50 g/km) plug-in hybrid vehicle that has a range in excess of 130 miles on a single charge. From the 2021-22 tax year the BIK rates will increase but still remain very low.
VAT differs between cars bought outright and leased through an operating lease. In general, if you use your car for 100% business use then 100% of the VAT is reclaimable. For lease plan cars, if there is any personal use then only 50% of the VAT on monthly lease rentals can be legitamatly reclaimed.
* As mentioned in the video, PHEV vehicles registered before the 6th April 2020 do not qualify for 0% BIK tax.
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#companycartax #companycar #mileageallowancepayments
If you want a company car and are looking to mitigate the company tax, VAT and benefit in kind tax then this video is for you. Let me us know in the comments your thoughts and experiences of getting a company car.
1:32 - Should you lease or buy a company car through your limited company?
2:30 - The limited company tax implications of a company car.
3:22 - The personal benefit in kind (BIK) implications of a company car.
4:17 - A useful company car benefit (BIK) calculator.
9:23 - What About VAT?
10:00 - How to Pay 0% Tax On Your Company Car
11:10 - What's The Alternative To Buying or Leasing A Company Car?
11:30 - Recap
Thanks for the time stamps
Really helpful. Gave me advice I had failed to find elsewhere - thank you.
You're welcome!
The best video that I’ve watched explaining the options . Marque (mark) = brand. Marquee = big tent, made me chuckle.
Hi Tom Martin thank you for your positive comment and support 😊 A small hiccup in the video, but at least it made you chuckle
Great Video. Thanks!!
You're welcome Upul Indika.
Enjoyed the video. I wonder if anyone has done this with a model X,
Also what happens with your car if you wind up your limited company.
Great video :)
You're welcome Andre, and thank you for your supporting comment.
Great video
Thank you chansons123.
Quality 👌🏿
Thank you The Bizness - we're glad our content is empowering you.
Great video, simplified everything however what's not 100% clear is if you lease an EV what are the tax implications to the business. It is clear that 100%FYA if purchasing but what if leasing, and therefore an operating lease?
Please do a video on commercial vehicles. Vans and pick ups
Hi Dan, we will put this request on our roadmap.
Don’t forget to include taxi’s also please
The point I didn't see addressed is the initial rental payment. Is it better to pay as little as possible or 6 or 9 months upfront. Is that tax deductible in year 1, and does it ultimately mean the lease ends those number of months early?
Hello, thanks for a great video. Everything seems very clear apart from one thing for me. On some websites it is mentioned that FYA is reduced by the amount of personal use - is this correct i.e. if you're not using car for business that much, would this wipe out all the benefit of saving corporation tax via FYA or 18% winding down allowance?
I'm a LTD company, I want to get an EV. The car will be 90-95% business use, my wife has a car I can use but inevitably there will be the odd occasion when I may have to use the lease car for some personal mileage. Is there a way to record what miles are business and those that are personal? This sounds like just 1 mile of personal use and you then have to pay 50% vat, which seems silly, but then we are talking HMRC?
What about employee benefit in kind I have had questions regarding this an employer is selling health insurance and life insurance then classing it as a benefit in kind and hitting employees with a tax bill
Can the 100% FYA be carried to the next company year if you are unable to use all of it in the current year of trading?
This is a great Video thank you. I am trying to work out exactly what my company car actually costs me per month and how much better off I could be if I switched to an electric. I understand how to work out the BIK % of my current car (which is a VW Passatt Estate), the BIK is £8,445 so at 20% the tax payable is £1,689. But does this mean that's all I will be better off for if I didn't have a company car or had a low % electric. What about how this would change my tax code because effectively i will have £8,445 more tax free amount. Can anyone help please as I can't get my head around that
good stuff :-)
Thank you Stephen
Can i used company car personal use ?
For a new LTD without historic accounts (changing from sole trader to Ltd.) is it possible to arrange a lease with a personal guarantee?
Yes there is a vanorama video staying just that
Hello! Thanks for a great video on this. Very clearly structured and explained. I have a question - based on IFRS 16 (effective 2019), operating leases are to be recognised in the Balance sheet. Am I missing something from this?
Looking forward to your response! Thanks
So to clarify, if I lease a PHEV with 46 miles pure electric range, CO2 emissions of 26g do I still pay benefit in kind tax?
Hi vantablack thank you for your question. You can go along to our Q&A section where you can post your question and get a response from a qualified accountant or chartered tax advisor >>> accountingtaxacademy.com/qa-section/
can you let your ltd borrow your personal car through an agreement (not lease) the ltd then pays for all running costs incurred through usage
Hi Kam, the simplest thing to do for a private vehicle is to claim mileage allowance. More details here >>> www.gov.uk/expenses-and-benefits-business-travel-mileage/rules-for-tax
got life
Great video. Does this only apply to new cars or does it also apply to second hand cars?
Hi Basil, thank you for your positive sentiment. It only applies to new cars.
Is it possible to buy a company EV car through a UK limited company, if the director lives outside the UK, for example in the republic of Ireland?
Hi Steve - from a tax perspective yes it is, as its your UK company buying/leasing the car and not you as an individual
Really nice explained, I would like to transfer my own car to my Ltd., do I have to fill up any paperwork?
Hi Mihail, yes there is procedure that involves formal paperwork.
@@tonydCFO do you have an email? Thanks
So if buy a car for 50k throughy ltd , does that mean I can offset 50k against my corporation tax for that tax year ?
Hi D P, thank you for your question. You can go along to our Q&A section where you can post your question and get a response from a qualified accountant or chartered tax advisor >>> accountingtaxacademy.com/qa-section/
6:33 2400cc engine.
Not anymore tax is over £300
This is silly how are they gonna know when it’s been used for personally ?
Quite often, company cars are assumed to have private use, as is the case in most situations - only if a company pool car is provided where you leave and park the car at work premises is it considered fully business related