In this week’s insightful podcast, Deepti and Phil delve into the question of whether buying a car through a company is beneficial. Here are the key takeaways:
- Personal vs. Company Purchase: The decision hinges on the car’s intended use (business vs. personal) and the nature of your business. If it’s primarily for personal use, buying it personally and claiming mileage for business travel is better.
- Claiming Mileage: For personal vehicles used for business, you can claim 45p per mile, which is often more cost-effective than claiming the actual fuel costs.
- Company Purchase Advantages: If the car is predominantly for business use, purchasing through the company allows you to claim VAT and capital allowances and include maintenance costs. However, this comes with a benefit-in-kind tax.
- Benefit-in-Kind Tax Considerations: The tax depends on the car’s CO2 emissions and engine size. Electric cars are more advantageous, incurring significantly lower benefit-in-kind taxes than diesel or petrol cars.
- Electric Cars: An electric car worth £40,000 could result in a benefit-in-kind tax as low as £160 per year, starkly contrasting to higher emissions vehicles, which could incur thousands in taxes.
- Recording Business Travel: Keeping a business travel log in a spreadsheet or using apps like QuickBooks can help claim business mileage accurately.
- Commercial Vehicles: Vans and similar commercial vehicles used 100% for business are exempt from benefit-in-kind tax.
- Accountant Consultation: Before making a purchase, discussing it with your accountant is crucial. They can provide tailored advice based on the car’s value, CO2 emissions, usage, and personal and business tax implications.
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CEO, Watermill Accounting