Electric Car Business Purchase - Appreciate assistance?
Discussion
I was trying to workout the value of buying an electric car through my limited company from April 2020. Car would be £100k approx. My understanding is:
- you can either lease it, and in which case, you'd claim back 50% of the vat on payments (so say it's £1000 pcm as an individual, it'd be £900pcm for the company as you could claim back half the vat?)
- or you can buy it (in which case, you can set the whole cost against profits with 1st year allowance? how does that work if you buy it via a HP deal or other finance? Can you reclaim the vat on finance payments as well?)
- the BIK would be 0% for me personally
- the road tax etc. would be paid by the company - so again come off pre-tax profits?
So if for example, a normal £100k car is £100k post tax (which you'd need to earn £200k in pre-tax profits to buy), a £100k electric car however would be £80k+VAT / £100k, of which £90k is actually payable, and you'd only need to spend £90k of your pre-tax profits to buy?
Apologies if this is a little confusing.... appreciate anyone who's looked at this in more detail?
What I'm thinking is that if you've got a £100k car personally, now, you've effectively had to take out £200k of profit to pay for it (£200k profit after tax = £160k, £160k paid out as dividends = £104k approx).
So if I sold my existing car, and swapped it to an electric car of the equivalent price, I'd effectively be paying HALF what I'm paying now in total value (value being the profit I've had to earn to pay for it)?
- you can either lease it, and in which case, you'd claim back 50% of the vat on payments (so say it's £1000 pcm as an individual, it'd be £900pcm for the company as you could claim back half the vat?)
- or you can buy it (in which case, you can set the whole cost against profits with 1st year allowance? how does that work if you buy it via a HP deal or other finance? Can you reclaim the vat on finance payments as well?)
- the BIK would be 0% for me personally
- the road tax etc. would be paid by the company - so again come off pre-tax profits?
So if for example, a normal £100k car is £100k post tax (which you'd need to earn £200k in pre-tax profits to buy), a £100k electric car however would be £80k+VAT / £100k, of which £90k is actually payable, and you'd only need to spend £90k of your pre-tax profits to buy?
Apologies if this is a little confusing.... appreciate anyone who's looked at this in more detail?
What I'm thinking is that if you've got a £100k car personally, now, you've effectively had to take out £200k of profit to pay for it (£200k profit after tax = £160k, £160k paid out as dividends = £104k approx).
So if I sold my existing car, and swapped it to an electric car of the equivalent price, I'd effectively be paying HALF what I'm paying now in total value (value being the profit I've had to earn to pay for it)?
The question has been asked a few times on here and in the finance section
The basics are
- Company car all costs go through the business as an operating cost. Forget 100% FYA - it unwinds when you sell the car and you only offset depreciation.
- If you lease, the lease cost goes through the company and asyou say you can recaim 50% of the VAT but that of course assumes you;re not on the flat rate scheme
Personally - the BIK is 0% so you get the car and no tax as such
But as a company car you an only reclaim 4p for each business mile driven, if it was your car it would be 45p (up to 10k miles or so)
The 0% BIK is not yet written in law - its 2% from April unless they do something
The low BIK is only valid if they maintain the EV exemption on salary sacrifice, if they drop it, no reason to think they will, it will revertlike other salary sacrifice schemes to the higher of the actual cost and the BIK rate.
The basics are
- Company car all costs go through the business as an operating cost. Forget 100% FYA - it unwinds when you sell the car and you only offset depreciation.
- If you lease, the lease cost goes through the company and asyou say you can recaim 50% of the VAT but that of course assumes you;re not on the flat rate scheme
Personally - the BIK is 0% so you get the car and no tax as such
But as a company car you an only reclaim 4p for each business mile driven, if it was your car it would be 45p (up to 10k miles or so)
The 0% BIK is not yet written in law - its 2% from April unless they do something
The low BIK is only valid if they maintain the EV exemption on salary sacrifice, if they drop it, no reason to think they will, it will revertlike other salary sacrifice schemes to the higher of the actual cost and the BIK rate.
Going off-topic slightly:
I'm currently suing a well-known German manufacturer for selling to me a faulty new vehicle which nearly resulted in my son and I having an accident on a motorway. Regrettably I have had to employ the services of a barrister and the case is ongoing.
I've replaced that vehicle with a new Tesla Model S. I too had been considering buying it through my company for the reasons outlined in this thread, however my barrister told me under no condition should I purchase a new Tesla through my business; a lot of them go wrong and Tesla are pretty horrific in their dealings with business customers (UK consumers have many more protections).
There aren't many £100k+ electric vehicles, hence me presuming you may be considering a Tesla. If so, the above may be food for thought.
I'm currently suing a well-known German manufacturer for selling to me a faulty new vehicle which nearly resulted in my son and I having an accident on a motorway. Regrettably I have had to employ the services of a barrister and the case is ongoing.
I've replaced that vehicle with a new Tesla Model S. I too had been considering buying it through my company for the reasons outlined in this thread, however my barrister told me under no condition should I purchase a new Tesla through my business; a lot of them go wrong and Tesla are pretty horrific in their dealings with business customers (UK consumers have many more protections).
There aren't many £100k+ electric vehicles, hence me presuming you may be considering a Tesla. If so, the above may be food for thought.
Andy M said:
Going off-topic slightly:
I'm currently suing a well-known German manufacturer for selling to me a faulty new vehicle which nearly resulted in my son and I having an accident on a motorway. Regrettably I have had to employ the services of a barrister and the case is ongoing.
I've replaced that vehicle with a new Tesla Model S. I too had been considering buying it through my company for the reasons outlined in this thread, however my barrister told me under no condition should I purchase a new Tesla through my business; a lot of them go wrong and Tesla are pretty horrific in their dealings with business customers (UK consumers have many more protections).
There aren't many £100k+ electric vehicles, hence me presuming you may be considering a Tesla. If so, the above may be food for thought.
There are lots of variables, so best to ask your accounting to run the numbers based on your salary etc. I'm currently suing a well-known German manufacturer for selling to me a faulty new vehicle which nearly resulted in my son and I having an accident on a motorway. Regrettably I have had to employ the services of a barrister and the case is ongoing.
I've replaced that vehicle with a new Tesla Model S. I too had been considering buying it through my company for the reasons outlined in this thread, however my barrister told me under no condition should I purchase a new Tesla through my business; a lot of them go wrong and Tesla are pretty horrific in their dealings with business customers (UK consumers have many more protections).
There aren't many £100k+ electric vehicles, hence me presuming you may be considering a Tesla. If so, the above may be food for thought.
I had a business and personal order going at the same time for a while. Didn't complete the personal purchase, but as far as I could tell, the customer experience was identical.
What kind of differences are you expecting buying via business?
I'm not really convinced that Tesla's are less mechanically reliable, statistically than other new cars. But yes if you need a certain SLA from the garage, probably not a good idea! My local is great, but it's a bit of a postcode lottery.
You get 100% capital allowance only if you buy outright. But you pay tax later on disposal. so you only really save tax on the deprecation,
Edited by anonymous-user on Saturday 28th December 13:19
It's half price buying through the business as I can workout. To take out £1000 in the business you have to pay effectively, 50% tax.
As Income:
- 13.8% Employers NI
- 11% Employees NI
- Income tax @ 40%+
So basically 60% tax
As dividends:
- 19% corp tax on your profit
- 32.5-38.5% dividend tax
So if you're earning £100k+.....paying £1000 per month on a car, means it's actually costing your £2000 in company profit.
If it's an electric car, that £1000 is actually £900, as you can reclaim half the vat. So you're looking at a car costing you £900 per month if it's electric, or £2000 per month if it's petrol, even if the "sticker price" is £100k on both.
That seems insane. If you own the business entirely, then effectively the tax on the business is just as much your tax as your personal tax is, so an electric car is massively tax efficient.
A Taycan Turbo S for example, is a £75k car, and a Turbo a £60k car, based on the above maths. A 992 Turbo on the other hand, costs you £300k in profit.
At least that's how it looks.
As Income:
- 13.8% Employers NI
- 11% Employees NI
- Income tax @ 40%+
So basically 60% tax
As dividends:
- 19% corp tax on your profit
- 32.5-38.5% dividend tax
So if you're earning £100k+.....paying £1000 per month on a car, means it's actually costing your £2000 in company profit.
If it's an electric car, that £1000 is actually £900, as you can reclaim half the vat. So you're looking at a car costing you £900 per month if it's electric, or £2000 per month if it's petrol, even if the "sticker price" is £100k on both.
That seems insane. If you own the business entirely, then effectively the tax on the business is just as much your tax as your personal tax is, so an electric car is massively tax efficient.
A Taycan Turbo S for example, is a £75k car, and a Turbo a £60k car, based on the above maths. A 992 Turbo on the other hand, costs you £300k in profit.
At least that's how it looks.
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