BEV and BIK - for a total newbie

[Powerfully Built Company Director]

Hi all - could someone please explain, in extreme layman’s terms, the exact tax benefits of buying a BEV via one’s own Ltd Company, per March 2025?

I own a limited company, am powerfully built , and have cash reserves available as both surplus cash from previous financial years, and this current tax year.

I just struggle to get my head around what the benefits are. To be clear, that’s not to say I don’t agree with them, rather, my head explodes before I’m able to reach a pounds, shillings, and pence side of it. As in, with a notional income of say £100k and notional retained profit of £100k, how does buying EV help me?

Thanks in advance.

[TheDeuce]

Powerfully Built Company Director said:

Hi all - could someone please explain, in extreme layman’s terms, the exact tax benefits of buying a BEV via one’s own Ltd Company, per March 2025?

I own a limited company, am powerfully built , and have cash reserves available as both surplus cash from previous financial years, and this current tax year.

I just struggle to get my head around what the benefits are. To be clear, that’s not to say I don’t agree with them, rather, my head explodes before I’m able to reach a pounds, shillings, and pence side of it. As in, with a notional income of say £100k and notional retained profit of £100k, how does buying EV help me?

Thanks in advance.

Well if you take 100k out as salary/dividend income, you're taxed at higher rate beyond £37k so you're paying tax and NI at ~40%

If you take £10k pa on a car (either lease costs or depreciation if you buy it) you pay yourself £10k less but the car which makes up the same value is only taxed for BIK at 2% - you'd be saving a thousands in tax.

The car is also an expense to the company so the CT is reduced by whatever the car costs in terms of lease/depreciation.


You should lease btw, not buy. It's easier for accounting/tax calcs and typically a well chosen lease deal will cost less than the car would depreciate in the same period. You'll struggle to find an accountant that wouldn't push you down the lease route. i assume you don't have an accountant because a) you're asking this question and b) unless you have an accountant that's a complete fkwit or you literally never speak to them, they should have got you into a company EV years ago!!

[Powerfully Built Company Director]

Thanks, appreciated.

So I do have an accountant… however the fault is mine, rather than theirs. They are remote, so when explaining at 100mph down a Team call, it’s always flown over my head.

And, I did have an EV previously - but has major issues (too long for this thread and not relevant), so it got shifted. It all happened within year, so, the financial benefits never really had time to land (and will appreciate with the rest of year end going on, I didn’t have time to grab a cup of coffee and sit down to ruminate over the actual impacts on the company and me).

That was bought outright however and not leased, so thanks for that pointer too…

[TheDeuce]

The long and short of it is that if you currently have a car that you pay for privately, you're using money that you've already been heavily taxed on to pay for it. Put an EV through the company and you can have a brand new car that is paid for by the company ahead of it or you being taxed.

You'll save thousands each year.

I suggest signing up to the newsletters of the main car leasing companies, they will then send you regular special offers that tend to be far better than on the public websites - although typically limited stock so you need to move fast. You can often get an £80-90k car on the drive for around £500pm net, more like £350 net if the tax savings by you and the company are considered. You'll never beat that sort of value of you buy the car and factor in depreciation!

[DeuceDeuce]

I don’t think there’s a best way to go about it. It’ll depend on your own, and your company’s circumstances.

Our situation for our company year just finished meant we wanted to reduce the corporation tax liability as much as possible so leasing wouldn’t help much.

We were keen to get a specific make/model so there’s a bit of emotion over rational decision making. It had to be at a specific minimum level of discount in order to help offset the expected depreciation (asked for 40% off got 35%).

We will buy the company EV in a future year where we have low/no profits (revenue tends to be lumpy) so we don’t end up paying too much of the corporation tax back. If the accountant says it’s okay to do so, I imagine the company will be paying for a service, extended warranty, tyres, brakes etc just before we buy it

[TheRainMaker]

Powerfully Built Company Director said:

Hi

How has that user name never been taken

[JustGetATesla]

Powerfully Built Company Director said:

Hi all - could someone please explain, in extreme layman’s terms, the exact tax benefits of buying a BEV via one’s own Ltd Company, per March 2025?

I own a limited company, am powerfully built , and have cash reserves available as both surplus cash from previous financial years, and this current tax year.

I just struggle to get my head around what the benefits are. To be clear, that’s not to say I don’t agree with them, rather, my head explodes before I’m able to reach a pounds, shillings, and pence side of it. As in, with a notional income of say £100k and notional retained profit of £100k, how does buying EV help me?

Thanks in advance.

If you buy a new EV thorugh the company, you write down the entire value in the first year. So if your company is on 25% Corp Tax and you buy a £100k EV, you save £25k in tax that year.

Unless you can prove that you do 100% of miles in it for business (and you can't...) then you can't reclaim the VAT on the purchase. If you financed it you can reclaim the interest paid as a deductible expense.

If you sell the car the funds received are added to your taxable earnings that year (as you'd already had tax relief on the full purchase price)

If you buy used its the normal 18% per year you can deduct as it depreciates.

If you lease you can reclaim the VAT on the lease and the leasing cost ex VAT is a deductible expense.

As an employee or director you pay BIK on the car which has been 2% but that will rise 1% a year to 5% as Jeremy Hunt put it up.

[PBCD]

TheRainMaker said:

How has that user name never been taken

I was happy with the acronym!

[TheDeuce]

JustGetATesla said:

Powerfully Built Company Director said:

Hi all - could someone please explain, in extreme layman’s terms, the exact tax benefits of buying a BEV via one’s own Ltd Company, per March 2025?

I own a limited company, am powerfully built , and have cash reserves available as both surplus cash from previous financial years, and this current tax year.

I just struggle to get my head around what the benefits are. To be clear, that’s not to say I don’t agree with them, rather, my head explodes before I’m able to reach a pounds, shillings, and pence side of it. As in, with a notional income of say £100k and notional retained profit of £100k, how does buying EV help me?

Thanks in advance.

If you buy a new EV thorugh the company, you write down the entire value in the first year. So if your company is on 25% Corp Tax and you buy a £100k EV, you save £25k in tax that year.

Unless you can prove that you do 100% of miles in it for business (and you can't...) then you can't reclaim the VAT on the purchase. If you financed it you can reclaim the interest paid as a deductible expense.

If you sell the car the funds received are added to your taxable earnings that year (as you'd already had tax relief on the full purchase price)

If you buy used its the normal 18% per year you can deduct as it depreciates.

If you lease you can reclaim the VAT on the lease and the leasing cost ex VAT is a deductible expense.

As an employee or director you pay BIK on the car which has been 2% but that will rise 1% a year to 5% as Jeremy Hunt put it up.

Indeed - buying as opposed to leasing just means the final net cost to the business is the depreciation of the asset instead of the monthly net cost of the lease. Leasing is often cheaper overall, but purchase can make sense as a means to smooth out cash flow if a big CT bill is looming... but that's only kicking the can down the road as the CT saved comes back (minus depreciation) once the car is sold.


Whatever method is chosen, the key point is the BIK. Instead of taking £10k extra dividend income a year and being taxed ~40%, you can have a £10k a year car and be taxed 2%, soon to be 3%. That huge saving is in addition to the company saving on CT too! My ~£80k EV costs about the same as a £25k Golf if I were to buy/lease the Golf privately rather than put the EV through the business.

[oop north]

You can only reclaim half the VAT on a contract hired car, not the full VAT - although you can reclaim the full VAT on maintenance and repairs including tyres.

I have had contract hire vehicles through the company but now have two cars bought outright. One was used which was far cheaper than getting on a lease the other brand new as we intend to keep for a long time (7 years to benefit from Kia warranty) though some of that period will be post-retirement and company closure

I really don’t like having to change my car on a fixed date, which is necessary on a lease / contract hire.

This may be a niche point but if you have profits more than enough to pay out £100k of salary and dividends, you can avoid suffering 60% tax while having the company pays car costs and salary and dividends well over £100k. Deduct EV benefit in kind amount from £100k, pay balance as salary / dividends. This maximises the cash you can get out without suffering 60%+ tax rates

[Up_North]

Also bear in mind that aswell as the BIK YOU must pay, your company will also have to pay additional NI. At the moment I think it’s 13.8% of the BIK value.

[Gone fishing]

Nobody has asked how many business miles you do as the rate you can pay yourself from the company is much lower if it’s a company car. This can undo a chunk of the benefits.

100k turnover means you’re vat registered, but if you opted for flat rate then you may not be able to recover any additional vat (which is half the vat on the lease, and all the vat on maintenance). Let’s also assume the cost of converting company income into taxed cash in your bank taking into account corp tax and dividend tax is 35% at the highest level.

Take a 50k car on a £500 a month lease plus vat

Company profit is reduced by 6k a year for the lease, you’ll reduce your tax by 35%, so £2,100, the net cost is therefore £3,900

VAT may be partially recoverable. If so, company profits are reduced by only £50 a further month, £600 a year, if you’re flat rate then it’s £100 a month, £1200 a year, Assuming worse case, it’s cost £1,200, less the 35% tax is £420, or the net cost is £780

On top of that, your deemed income will will be hit by 3% of the car list price or £1500 in 2025/26, £2000 the year after and £2500 the year after that. You”ll pay tax on this at your highest rate.
Your personal tax will be 40% so the net cost is 1500x0,4 = £600

If you drive 5000 miles a year on business, you’ll only be able to pay yourself 5000 x 0.07p or £350 a year as an expense. (It can be more complicated if you try to recover actual charging costs which can quickly be a paperwork nightmare). If the car was privately owned, you can pay yourself 45p a mile, or £2,250, saving the tax on about £2000, or rather if you had a company car, you would pay tax on £2k more or, at 35% that’s a net extra tax of £700

Add it all up… the cost is around £6k

Simplistically If you could get the car on a personal lease for £500 a month plus vat it would cost £7200. You’ve gone to all that trouble to save £1200. You may find private leases are also cheaper, they certainly are compared to salary sacrifice schemes.

Then factor in your personal situation and the various rates, allowances, thresholds, etc plus how you buy insurance, if there’s much maintenance which generally there isn’t other than tyres in the first 2 years, etc, if you’re over 100k the allowance changes etc etc, which is why accountants are recommended.

The TL;DR is don’t listen to people on the internet, every answer has missed relevant information to you.

[Seventy-Eight]

TheDeuce said:

.... the key point is the BIK. Instead of taking £10k extra dividend income a year and being taxed ~40%, you can have a £10k a year car and be taxed 2%, soon to be 3%.

The BIK percentage is applied to the original list price (including options) each year, not to the annual cost. And although the BIK percentage is only 2% now, the plan is to increase it to 9% by 2029

[TheDeuce]

Gone fishing said:

Nobody has asked how many business miles you do as the rate you can pay yourself from the company is much lower if it’s a company car. This can undo a chunk of the benefits.

100k turnover means you’re vat registered, but if you opted for flat rate then you may not be able to recover any additional vat (which is half the vat on the lease, and all the vat on maintenance). Let’s also assume the cost of converting company income into taxed cash in your bank taking into account corp tax and dividend tax is 35% at the highest level.

Take a 50k car on a £500 a month lease plus vat

Company profit is reduced by 6k a year for the lease, you’ll reduce your tax by 35%, so £2,100, the net cost is therefore £3,900

VAT may be partially recoverable. If so, company profits are reduced by only £50 a further month, £600 a year, if you’re flat rate then it’s £100 a month, £1200 a year, Assuming worse case, it’s cost £1,200, less the 35% tax is £420, or the net cost is £780

On top of that, your deemed income will will be hit by 3% of the car list price or £1500 in 2025/26, £2000 the year after and £2500 the year after that. You”ll pay tax on this at your highest rate.
Your personal tax will be 40% so the net cost is 1500x0,4 = £600

If you drive 5000 miles a year on business, you’ll only be able to pay yourself 5000 x 0.07p or £350 a year as an expense. (It can be more complicated if you try to recover actual charging costs which can quickly be a paperwork nightmare). If the car was privately owned, you can pay yourself 45p a mile, or £2,250, saving the tax on about £2000, or rather if you had a company car, you would pay tax on £2k more or, at 35% that’s a net extra tax of £700

Add it all up… the cost is around £6k

Simplistically If you could get the car on a personal lease for £500 a month plus vat it would cost £7200. You’ve gone to all that trouble to save £1200. You may find private leases are also cheaper, they certainly are compared to salary sacrifice schemes.

Then factor in your personal situation and the various rates, allowances, thresholds, etc plus how you buy insurance, if there’s much maintenance which generally there isn’t other than tyres in the first 2 years, etc, if you’re over 100k the allowance changes etc etc, which is why accountants are recommended.

The TL;DR is don’t listen to people on the internet, every answer has missed relevant information to you.

And your answer has missed that if it's paid for privately, the money used to pay for it privately has already been taxed at ~40%...

[TheDeuce]

Seventy-Eight said:

TheDeuce said:

.... the key point is the BIK. Instead of taking £10k extra dividend income a year and being taxed ~40%, you can have a £10k a year car and be taxed 2%, soon to be 3%.

The BIK percentage is applied to the original list price (including options) each year, not to the annual cost. And although the BIK percentage is only 2% now, the plan is to increase it to 9% by 2029

Indeed, but it's still far cheaper than paying higher rate tax.

The 1% escalation each year does signal the end of the gravy train... But several years left yet.

[Gone fishing]

TheDeuce said:

And your answer has missed that if it's paid for privately, the money used to pay for it privately has already been taxed at ~40%...

You’ll find that’s taken into account of as the comparison is taking money in the company and either paying tax on it extract the money from the company to then lease the car, or lease the car in the company and then pay the various taxes. Your suggestion would in effect be double taxation