Personal Car or Company Car?

Buying a personal car or company car depends on what you require the most. To make any of these decisions, looking towards what advantage it will leave you with is a must.  The allowances and reimbursement of expenses depends upon the option i.e. what kind of car purchase is that either a personal or company investment. So, always think one step ahead and make purchases as needed.

Buying a personal Car:

Having a personal car will ease your commute. But however, if you are looking for tax relief in buying a personal car, there are no such benefits. The only condition where you are liable to claim for your car expenses is if you use it for business purposes.

There is a fixed rate set by HMRC with regard to the reimbursement of car expenses used for business travel. HMRC will reimburse 45p per mile for the first 10,000 business miles traveled in a given tax year and 25p per business mile thereafter which is tax-free income for an individual. And also VAT registered businesses can claim VAT relating to the fuel.

But, make sure to keep the proper recording of the expenses made during the business travel to further claim on the expenses.

Buying or leasing a company car?

A company car is a vehicle made available to the employees of the company for business and also for their private purpose.

But, one major thing to note is that you should not be confused between company and pool car. While a company car is used by a single employee, owned by the employer, and used for business and personal purposes, a pool car is used and driven by various employees just for business work.

Where your employees use cars other than the business purpose then you will not be able to reclaim the VAT associated with the company car. However, you can reimburse VAT on a company car used for business-related costs such as car insurance, car maintenance, and other similar charges. Just be aware that you are capable of claiming the car expenses associated with the business.

Now, What if you lease a company car?

Leasing a company car will not allow you to claim for capital allowance since you don’t own the asset. Along with that, you will be liable to pay personal income tax and NI on the value of the car for the private use of the car as Benefit in Kind (BIK).

The only benefit is that you might get a cheaper deal while leasing a company car for business purposes.

Company Car and associated benefits

Having a company car is the ultimate benefit. So you will be liable to pay benefit-in-kind tax for the value of the benefit you receive at your personal income tax rate. How much tax you need to pay will depend upon the CO2 emissions and fuel type of the vehicle. See the chart below to find out what kind of vehicle will benefit you more:

Advantages of Company Car over Personal Car

1. You do not have to worry about the reducing value (depreciation) of the vehicle, as you don’t own the company car.
2. You do not have to bear costs related to the maintenance or servicing, insurance, fuel, and similar expenses.
3. Since you will be free from a financial agreement, you will have no financial trouble regarding the payment associated with the car. You will be liable to pay only benefit in kind (BIK) tax as required.
4. You can take full benefit of a company car as you can use it for private purposes too, without being much worried. Since you will pay the tax as per your personal income tax rate, which does not add up any extra tax rate.

Conclusion

To sum up, it is best to buy a company car in order to avoid the income tax implications. If you do not have enough company funds or the company is growing, we suggest you buy it privately. It is recommended that you buy a very energy-efficient car so that your tax bill becomes as low as possible.

Registered Auditors in London

GOV.UK