Are you thinking about getting a new car?
Are you confused of how to buy it, be it in your own name or company?
The problem – There are so many ways to buy cars and this can lead to confusion
I often find that people buy cars without necessarily thinking about their cash flow or need their tax position, be it employees, business owners or property investors. Many people will buy a brand new car because the love the feeling of treating themselves to something new. After all you deserve a reward for all your hard work. The issue with this is the value. As soon as you drive a car a few miles away from the forecourt you ought to know that the value of the car drops in value by 20%+.
Equally there are people that go for a company car or buy a car in their own company name and have all their fuel paid. This seems like a great idea because the company makes all the payments. The issue with this approach is that you are taxed quite heavily for the car value and fuel known as HMRC: Benefit in Kind (BIK)
Can you relate to the above?
Can you see how buying a car in the wrong structure may be damaging to your cash flow / tax position?
If you have answered yes to these questions then this article will be an interesting read.
There are clearly other benefits in regards to car leasing. I have written more about this and demonstrated that it is much better to have a business lease, which you personally pay and you claim mileage rate for all business trips
1. It is better for cash flow to get a lease rather than forking out for a brand new car that simply is depreciated as soon as you drive it off the forecourt
2. You can often get full maintenance leases, which means you do not pay out for wear & tear repairs / maintenance.
3. You will often get a better discount for having a car lease in your business name rather than your personal name
4. You will not be taxed as having a benefit in kind (BIK) if you pay for the car. BIK will be more costly, from a tax perspective, than claiming mileage.
Practical steps you should now take to buy a lease car in a business name:
It is one thing to understand the theory but it is another to put it into practice. This is why I have written a step by step guide to implement this strategy
1. Put the lease car in the business name to get discount. Search this website for great deals.
2. Put the invoices in your limited company as “Directors loan”, which you will then owe the company
3. Claim mileage for using the car. Mileage is an allowable expense to reduce your tax bill that will help you reduce your business / property income
Next steps – Being tax efficient whilst leasing a car
If you want to understand how to implement this strategy or to discuss other finance / tax questions then please book some time with us using the below calendar
If you are looking for a new accountant then please book some time with us using the below calendar. Please note that this booking is to describe our services and will not be used to discuss your personal tax affairs