Many business owners jump at the chance of putting their vehicles through their own company, but doing so can have significant tax consequences.
If you buy your car personally you’re able to claim mileage for the business miles travelled in your car. HMRC’s current allowance is 45p per mile, for the first 10,000 miles per year and then 25p for each additional mile. If you’re taking additional employees in your car then you’re able to claim an additional 5p per mile for work related journeys.
If your car is provided by the company, which is then available for private use, this is classed as a Benefit In Kind on which you would be required to pay tax. This benefit is calculated using the list price of the car, fuel type and CO2 emissions.
In addition, there is a Fuel Benefit Charge. This is calculated by multiplying the Fuel Benefit Charge (£22,600 for 2017/18) by the car’s appropriate percentage which is based upon CO2 emissions.
The full benefit is reduced to Nil if the employee is required to make good the full cost of all private fuel. Furthermore, the company also has to pay Class 1A NIC on the taxable benefit.
There is currently no charge for cars powered by electricity. The type of car you wish to buy along with your mileage and personal use affect whether it is most tax effective to buy your car personally or through your business. Ask your Advisor before committing either way.
Considering buying a car through your company? We can work out the tax implications for you to weigh up whether it’s beneficial. Contact our Bolton based accountant, Nicola Roby to discuss the tax implications on 012041 534 031 or contact us via our enquiry form.
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