Operating through a limited company, you have the option of a company car. In most cases the Benefit-In-Kind (BIK) tax cost is greater than the tax saved by the company.

APRIL 2020 - there is a big shift with 100% electric cars; excluding Hybrid's.

At present

• A low emission car (which includes Hybrid's & 100% Electric) has a typical BIK charge of 16% of the List Price
• List price is the brand new price, regardless of what you actually pay for the car.
• The 16% BIK charge becomes the taxable amount e.g. Car costing £30000 x16% = a charge of £4800, which is the taxable figure.
• We can offset running costs as well as the cost of the car, but the tax on the BIK charge usually greater than any savings made. 
• If a higher-rate tax-payer reduces their dividends by the same amount as the car cost, the tax saved on personal tax can turn the tax cost into an overall gain.

More expensive cars with bigger engines are generally are not worth it; the BIK cost is too great.

Change

• From 6th Apr 20, 100% electric cars BIK is dropping to only 2% of the list price, which equals a very low tax charge. 
• After offsetting the tax relief on the running costs and the cost of the car, the result is a definite tax saving.
• Couple this with any personal tax saving by reducing your dividends results in even more tax saved; could over £10000+ over a 3-year period.

Example - Tesla worth £75,000, costing £1000 p.c.m. on a lease.

2019-20

• BIK annual tax charge after running costs deducted is £3456.
• Reduced by corporation tax saved annually £2280 = net cost £1176 p.a.
• A higher-rate tax payer can save £3900 pa in personal tax if they reduce their dividends by the cost of the car; it can turn the cost into gain in the right circumstances.

2020-21

• BIK annual tax charge after running costs deducted is £183.
• Reduced by corporation tax saved annually £2280 = NET GAIN £2097 p.a.
• A higher-rate tax payer can save even further £3900 p.a. in personal tax if they reduce their dividends to a total saving of £5997 p.a.
• Over a 3-year period these tax savings are nearly £18000.

The purchase option calculations are longer and more specific.

A consideration is an electric car as a second car as a company car for use within their own city/locality and keep their fuel car for longer journey's.

Company car calculations are specific to the car of your choice and your tax circumstances.

Factors in deciding:

1. Charging points.
2. Which electric car do you want.
3. Can you afford to pay for the car.
4. Lease or purchase - further information on car finance options can be found on my page VEHICLE FINANCE under the GENERAL ITEMS tab along the top banner.

If you wish to consider this further, please get in touch.