Car via Limited company

[sean190583]

Hello

I was hoping for a bit of advice. I am looking to get a car via my limited company, but am a little stuck on the best financial way to do this. i.e.

- Is PCP or Contract Hire better, or lease?
- Is it better to do Electric, Hybrid or Petrol/Diesel.
- Is it better over 12, 24, 36, 48 months
- If I paid a deposit would they be paid out of the business or personal?

I am looking at the most tax efficient way to do this and what would be the £net to me over the period.

i.e.

Option 1 - PCP on an Electric car with a £5k deposit, at £500pm for 36 months = Net payment £23k but it would reduce my tax by £x so the net would be £y.
Option 2 - Contract Hire on a Hybrid car with a £5k deposit, at £500pm for 36 months = Net payment £23k but it would reduce my tax by £x so the net would be £y.

Any help or advise you could give me would be greatly appreciated

[hobnob]

Welcome to the forum, and well done for posting this in a professional forum rather than "General" (a common mistake).

This topic has come up a few times before, so it's worth doing a Google search to read through previous discussions. Try this search string:
car site:forums.contractoruk.com

In brief, think carefully about whether you actually want to go via your limited company. This blog post points out some of the pitfalls, although it's from 2015 and some of the figures have changed:
Company cars are overrated | Chris Maslin's blog

Looking at the tax bill, you need to think about the BIK (Benefit in Kind), which is significantly lower for an EV (Electric Vehicle). However, with any vehicle it's going to be based on the original purchase price, not the current value.

I don't currently own a car. If/when I do buy one, I'm planning to buy a second-hand EV personally, then charge my business mileage to the company.

[Lance]

Hello

I was hoping for a bit of advice. I am looking to get a car via my limited company, but am a little stuck on the best financial way to do this. i.e.

- Is PCP or Contract Hire better, or lease?
- Is it better to do Electric, Hybrid or Petrol/Diesel.
- Is it better over 12, 24, 36, 48 months
- If I paid a deposit would they be paid out of the business or personal?

I am looking at the most tax efficient way to do this and what would be the £net to me over the period.

i.e.

Option 1 - PCP on an Electric car with a £5k deposit, at £500pm for 36 months = Net payment £23k but it would reduce my tax by £x so the net would be £y.
Option 2 - Contract Hire on a Hybrid car with a £5k deposit, at £500pm for 36 months = Net payment £23k but it would reduce my tax by £x so the net would be £y.

Any help or advise you could give me would be greatly appreciated

you're asking the wrong questions entirely.
You need to consider BIK and VAT before thinking about financing options. (HINT: BIK effectively rules out any petrol/diesel cars that aren't a commercial vehicle).

Also. Financing is going to be more expensive through a LTD company 'cos of limited liability (who knew?).
PCP is a personal deal so forget it.
If I were to do this, I would purchase outright with retained company profit. But I guess you don't have the profit. On that basis you should seriously consider getting your priorities straight. Are you a new contractor? If so what happens if you end up without an outside IR35 contract in 3/6 months.

Do a search of the forums, in accounting/legal (the correct forum) as this is asked often.

[sean190583]

Thanks Hobnob, I really appreciate your response. I have had a look at the links you posted which is helpful, thank you.

Lance - people use these forums for advice not to receive spikey comments. But just do you can sleep better tonight - I do have my priorities straight. I do have the profit in my company but would rather leave the capital so I can invest. I am not a new contractor. My contracts are always outside IR35.

Thanks both.

Best regards

Sean

[Lance]

Lance - people use these forums for advice not to receive spikey comments. But just do you can sleep better tonight - I do have my priorities straight. I do have the profit in my company but would rather leave the capital so I can invest. I am not a new contractor. My contracts are always outside IR35.

not sure it was spikey. Maybe you need to read what was written rather than inferring emotion into the words.

As for investment.... I'm not sure why you'd invest company money but then take expensive finance for a car. That sounds like a really dumb idea (not spikey just truth).
Here's one recent example of where it's gone wrong for someone else How to do a claim assignment in order to dissolve ltd. company - Contractor UK Bulletin Board

A leased car via your company will be expensive compared to personal finance.
An investment via your company will be taxable, twice, whereas a personal investment in pension/ISA avoids tax.
I wouldn't normally point out these completely obvious points, but as you seem to have missed the eye-watering BIK you'd pay for a diesel/petrol car (Benefit-in-kind (BIK) company car tax bands 2020/2025 (fleetnews.co.uk) I think you are missing something.

So you can do what you want. There are many options. But unless you are going for a low BIK it's not worth it.
And if you have $$$$ in the bank then you should use that to buy the car.

I had assumed you had no cash in the company. Investment is a totally different question and as you've mentioned it I've given my twopennorth of why it's a dumb idea.
If you don't like the advice then fine, but don't get irritated if you don't like the answer.