As the director of a limited company, you need to decide who owns the car – you or the company. We can help you make this decision, as you will need to carefully consider various tax implications, such as the size of the car and its running costs. 

 

If you decide that buying through your limited company is the right move for you, you could potentially claim capital allowances on the cost of buying the car. However, the fact that you would need to put the day-to-day running costs of the car through the company’s accounts means that the company’s profit decreases. This does mean that the company’s corporation tax bill would be reduced, but you would personally have to foot the bill for the BIK tax. 

 

Owning the car as a personal asset may be a simpler option, in some cases. Like a sole trader, you would claim expenses back on journeys made for business purposes. To do this, you would add up your business mileage for the tax year, and then apply the rate set by HMRC per mile to that. 

 

However, this method may not be suitable for all vehicles, as certain cars are significantly more expensive to run than the HMRC rate per mile (which is currently 45p, decreasing to 25p once your business travel reaches 10,000 miles). These rates have not changed in years, so it is likely that they may not cover the fuel and running of more expensive models. 

As the business world becomes increasingly digital, people in roles that traditionally required lots of travel, such as sales people, are now able to carry out the majority of their roles entirely from their computer, negating the need to travel up and down the country. 

 

 

HMRC is recognising the changing attitudes limited company owners are having towards company cars, and this is reflected in taxation legislation. Salary sacrifice exemptions for ultra-low emission vehicles (ULEVs), vehicles that emit less than 75g of carbon dioxide per kilometre travelled, make electric and hybrid-electric vehicles an attractive option to employers providing company car schemes. 

 

And there is currently a plug-in grant that enables you to obtain up to £3,500 off the list price when purchasing eligible electric cars. See details direct on HMRC's notice here (correct at Oct 2018). The details on this are updated regularly, so this blog will quickly be out-of-date - so always get in touch with us to discuss the current options. 

 

However, ULEVs can be fairly pricey, and there is currently only a limited amount of such vehicles on the market, which is less appealing for drivers who want more choice of vehicle. 

Generally, company cars are not worth the cost anymore, and in most cases, we advise against them - unless you are looking at a ULEV. 

 

However, there are some good perks of a company car scheme. In most schemes, the cars you can purchase through your limited company are brand new and new models come in every three or four years, which is a particularly attractive perk. If you have employees, providing a car to them can be an alluring benefit to them. 

 

There is a flip side though, and it’s our opinion that, in general, company cars are often a greater cost than benefit. BIK tax rates are becoming more and more expensive, particularly for high-value vehicles. The tax rates increase even more when you buy fuel through the company. 

In the grand scheme of things, company car taxation is far from simple, and there are a huge number of variables to consider. 

 

Book a call or email us today for bespoke advice, tailored to your individual circumstances. We will explain your options in simple, understandable terms, and help you come to an informed decision based on your specific situation.