Well, essentially a company car, if you get a car through your business, it’s an expense for your business. That’s great in some ways, because it means you can put it through your books and get a corporation tax saving.
It means you’re getting use of a vehicle, right? Without having to take money out of your business. So it means you’re also saving dividend tax. And then also depending on how you bought that vehicle or you leased it, you may get some of the VAT back on top of that. So those are some really good advantages of having company car.
But there is one big drawback in certain circumstances, and that is quite often, depending on the car, you will have to pay company car tax. So you get all these tax savings that I just talked about, but on the other side, you’ve got to pay the company car tax. Certain cars like electric cars or it’s actually minimal or barely noticeable.
And then it makes a lot of sense to put an electric car through your business. Other types of vehicles like plug in hybrids, it starts to get more get more expensive in terms of company car tax. And then if you’re driving like a petrol or diesel gas cuzzler, you will find that the company car tax in some cases is probably worth more than the actual car or what you’re paying in terms of lease payments on the actual car.
And this is where people really get caught out. They do things like buy Porsches and other types of vehicles that are Luxury cars, essentially, that spew out CO2. And because company car tax is not actually worked out based on the actual value of the vehicle, but based on how environmentally friendly it is, people even buying old cars which have almost no value can end up paying eye watering amounts in company car tax because that car is just spewing out CO2.
So this is just something I just wanted to make people aware of. I’m not going to go into all the little calculations, but because… The main message here is if you are thinking about buying a car and you want to know whether to put it through your business or own it personally obviously it depends on what kind of vehicle it is, but really it’s a conversation you need to have with your accountant because.
A lot of the time, once you sign up to that agreement and it’s in your business name or your personal name, it’s very difficult to undo that agreement. It’s not always as simple as just switching it from your company name to your personal name if you realize, in fact that the company car taxes are too high.
So actually what you’ve got to do is just do a bit of planning, get the right advice from your accountant. It’s really important to do that. But yeah, you save some money on certain taxes like corporation tax, dividend tax and DAT. In certain cases, but then you end up paying money back in company car tax or PLMD tax.
Sometimes that can be very low if it’s an electric car or can be astronomically high if it’s a petrol or diesel car that spews out CO2. So that’s what I wanted to just cover here. And then, well, just remember you can have a vehicle and not necessarily put it through your business, but yeah, you don’t get those tax savings.
I was talking about if you don’t, if you own that vehicle personally, but then you don’t pay that horrendous company car tax. But also then if you own the vehicle personally, you can actually just reclaim mileage from the business for business miles that you do in that vehicle. And just charging back to your business at 4 to 5 PM miles.
So definitely worth factoring that in. And also just don’t forget, if you do have a company vehicle, like a company car, you can still reclaim your mileage or the fuel or the electric charging costs from your business as well. So that’s just worth noting. So thanks for watching this video and I will see you in the next video.