This is a sponsored post to help you to save money and time on purchasing a company car.
In the current era where people are still recovering financially around the world, you definitely want to plan the costs involved before purchasing a brand new car through a limited company.
At first sight, this idea might look like a fantastic idea to save taxes. But, it would help if you also considered the replications of this idea. Without considering the tax implications and associated costs, you could end up spending more than you expected in your business.
This article is all about summarizing the implications to help you make a successful decision. Moreover, we’ll also tell you how a limited company accountant can appropriately guide you in buying a car through your business.
How does company car tax work?
A company car can, at times, make you excited. However, it would help if you considered the potential tax implications of it.
Selecting the wrong car can make your experience awful. The company car you’re going to buy depends upon your salary, the amount of (CO2) carbon dioxide it emits, and the cost of the car. You calculate the tax by multiplying your company’s car value.
Your company car’s P11D value is the sum of its VAT, list price, optional extras with a BiK rate, and delivery cost.
In this regard, you can take advice from a Business tax accountant to proceed further. Every car you intend to buy falls into the category of Bik bands because these bands rely on CO2 emission levels.
How much tax will I pay on a company car?
If you buy a company car for personal use, you’ll have to pay tax. Moreover, if you also want to buy the fuel through your company, you’ll be charged for this separately.
The tax of a company car is determined by some factors, including the car’s list price and the amount of fuel needed to run. Meanwhile, you’ll find a 4% surcharge on every diesel to purchase.
If you don’t want to pay the heavy tax for your limited business car, you need to use your car part-time, meaning use it when you need it.
On the HMRC website, you can see the car tax for the year by using the Company Car and Car Fuel Benefit Calculator.
Should I buy a car under my name or through my Limited Company?
When people opt to buy a car through a limited company, they often ask, “Is it helpful to buy a car under their name or not”?
You’d not find any clear-cut and precise answer to this question, but you need to consider these three factors before coming to any conclusion.
- Do you want to purchase the car for personal use or business purpose?
- What are your car’s (CO2) Carbon dioxide emissions?
- The list price of your vehicle?
After finding the answer to these three questions, you’ll probably be able to find an appropriate and beneficial way to acquire a car through a limited business company.
Later, if you still can’t figure out the right way to go ahead, seek help from a limited company accountant. He is in the right position to give valuable advice.
Can I use the car exclusively for business as well as private use?
You can use your car for your private and business purposes. However, you need to consider the VAT on a car. VAT becomes even more important when you intend to outright purchase from your company.
A person possesses the opportunity to reclaim the VAT on your car when you use it for business purposes rather than private use.
You need to remember, if you’re using the business car for personal use, the amount of taxes will increase dramatically. On the other hand, a car purchased for business purposes doesn’t cost your heavy taxes.
How many cars can I tax deduct in my business?
It is a pretty trending question, and almost every person looking to purchase a vehicle through a limited company tends to ask this question.
The answer to this question is simple; you’ve got the luxury to deduct the costs of operating and owning as many cars as you need for your business. But always make sure that you can cover the costs of the car.
In this regard, documentation will be a key factor, including an expense and mileage log.
In addition, you’ll also don’t need to register your cars in your business name if you’re a partner of a business or sole proprietor.
Tax benefits of driving a hybrid
You’ll get many huge benefits from driving a hybrid car. For instance, you’ll be able to claim the credit on your Tax Return.
Moreover, it allows claiming the credit by amending a tax return when you’ve purchased a car one year earlier and the owed taxes. Luckily, this credit won’t be refundable and will likely take an offset tax liability for a specific period.
Another big plus you carry with driving a hybrid car is that you don’t have to answer some tough questions when preparing and e-filing tax returns for claiming your credit.
Thus, you only need to answer a couple of easy questions, and this will be enough to claim credit for your tax.
If you want to know more about hybrid vehicles, a business tax accountant will be an appropriate man to guide you through this matter. You can take the notes from his personal experience and tips that you’d be provided with.
Updating your company car fuel details with HMRC
You’ll need to pay the tax if you want to use your company car for personal use. The tax of any car depends upon the purchase price and fuel that it uses.
The car loses its tax value when you acquire it for part-time use, or the car offers low CO2 emissions. Moreover, you can take the services from HMRC to pay your tax. In this regard, you need to check the details of your company car.
In addition, you’ll also need to tell HMRC about any changes you make for a particular period of time. Besides, it helps if you also update the fuel benefit when an employer pays for the fuel.
To sum it up, buying a car through your company can be, at times, tricky. You can’t expect to save money on it until you’ve got complete knowledge of how things work.
For instance, if you’re using the company’s car for your personal use, you’ll need to pay heavy taxes and fuel costs. However, using cars for business use can save you from paying taxes.
Finally, it is why you need to consult a business tax accountant before making any final decision about buying a car through a company.
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