New car on PCP or lease - tax question

[AFKMatrix]

Hi there,

I'm new to this forum and I am looking into becoming a contractor but not until April next year.

But I currently have a car on PCP that ends in April of next year and so I am currently looking for a replacement. Now I am confused whether I should get the new car on a business lease or a PCP. Are there tax advantages to getting the car with a business lease?

BTW I am very clueless about tax at the moment, I'm slowly learning though, so if you can keep it simple that would be great!

Kind regards,

AFK

[Maslins]

If you want to keep things simple, avoid a business car lease (ie don't get "a company car"). They're rarely a good idea anyway IMHO, and they're always more complicated.

Just use your own car (whether owned or leased), pay all costs relating to it from private funds, and claim 45p/mile for business miles done.

[northernladuk]

There are many tax areas that will crop up and you will have to research them all. Phones, to home office to cars. Anything you can think of has been asked plenty of times.

If you are struggling with the basics then read the links to the right, particularly the First Timers one and expand from there. A ton of stuff that will answer a vast majority of questions.

If you really can't find an answer then search the forums for similar questions. To do this go to google (or bing) and type in your keyword followed by Site:forums.contractoruk.com
So this one would be something like 'company car site:forums.contractoruk.com' which would return This

Failing that you'll need to speak to an accountant who you need to engage prior to starting contracting so they can help you get set up properly.

[fatJock]

If you want to keep things simple, avoid a business car lease (ie don't get "a company car"). They're rarely a good idea anyway IMHO, and they're always more complicated.

Just use your own car (whether owned or leased), pay all costs relating to it from private funds, and claim 45p/mile for business miles done.

This ^^^

I looked at various options and personal lease it the least aggro - keeps things simple.

[Spoiler]

May be worth revisiting in FY 2020/21when the BIK on electric vehicles is reduced to 2% (unless something changes before then !).

[SandyD]

This ^^^

I looked at various options and personal lease it the least aggro - keeps things simple.

Not always, for example I am getting a new car, I do need it as my old car is on its last leg, I do not have the funds from my personal account to pay for a the car, so my options are to: either withdraw cash from company and buy it personally, then pay very high tax on the withdrawn money. Or get it as a company car, yes I need to pay BIK tax however, my company will actually be at least 4K better off for claiming annual depreciation on the car.
Best to speak to your accountants and see best option for you, of course if you have the funds sitting in your personal account, use that, but if you don't then look at various options depending on your circumstances and of course the type of car, the taxes are different depending on the type of car... electric is best, but hybrid is good too for tax issues.

[Ebenezer]

You might need to give this a bit more thought; if you can't afford to buy the car you want for cash you should probably be thinking about your priorities.

In addition you will almost certainly spend more on depreciation of the new car than you would on fixing of the old one.

[Spoiler]

You might need to give this a bit more thought; if you can't afford to buy the car you want for cash you should probably be thinking about your priorities.

In addition you will almost certainly spend more on depreciation of the new car than you would on fixing of the old one.

Didn't think people bought cars with cash these days - mainly PCP isn't it ! That's how people can "afford" a new car with no savings

[Ebenezer]

Quite, PCP seems to have had the effect of convincing a large number of people that buying a new car isn't ridiculous.

Prior to all this, I think the main purpose of new cars was to let Barry from accounts drive around in a new ride which made him feel a bit less despondent about the futility of his existence - not to mention the handy side-effect of reducing his pensionable salary when the axe inexorably fell.

[Lance]

Not always,

yes pretty much always. Unless you have a van and somewhere else to park it other than your house.

for example I am getting a new car, I do need it as my old car is on its last leg, I do not have the funds from my personal account to pay for a the car,

you should address your expectation of what sort of car you want. I can find you a car for under £1,000 that will run for several years, with only minimal repair bills (if you get a big repair bill you scrap it and start again.

so my options are to: blah blah blah not very relevant drivel

If you can't afford what you want, save for it and buy it then. Company cars are expensive, and not just for the tax reasons.