Leasing Car through Co, Low miles and save the whales Car...

[TheCyclingProgrammer]

TCP, veering slight off topic but the ecoboost engine is amazing - my parents have one. It even sounds good.

I didn't understand your comment re NIC

My understanding is:

Company pays lease (say £200PCM) so overall corp tax liability is less.

My accoutnant chap can do so black magic with a bit of the VAT to save tuppence.

I pay BIK (say 11% Of 20% of p11d) - I may have that the wrong way round but I'm sure you get the gist

Someone pays insurance (good points there)

What else is there to consider?

I'm on FRS so no VAT savings to be had.

There's two parts to the BIK - the income tax side, which for a basic rate payer would be 20% of a percentage of the car's P11D value - about 11% for the Ford Fiesta I'm looking at. Another way of looking at this would be to reduce my personal allowance by the BIK amount; the net effect is that while I don't actually end up with a tax bill, it does reduce the amount of dividends I can take out before hitting the higher rate tax threshold.

The second side is the Employers Class 1A NIC on the benefit, 13.8%.

The corporation tax saving and basic rate tax on the benefit cancel each other out (or if I do a salary sacrifice it makes no difference overall), so the extra cost to the company is the 13.8% NI (minus 20% of this as it's CT deductible).

So not a great extra cost but it does reduce my overall take-home by slightly more than if I paid for the lease personally (and there would be no NIC bill either then) and then adds the complications of getting insurance. It also rules out getting a PCP deal.

[TheCyclingProgrammer]

A car loses loads of its value in the first 2 years. Either keep leasing or just get a slightly older car. Not being the first owner won't kill you.

I realise that, but I'm quite keen on the new 2014 EcoBoost model. I can accept the depreciation as part of the cost of ownership. Point is, I don't have to buy it, I can keep leasing, but if it proves to be reliable then I'd rather buy it at the end of the term and then keep it for as long as it runs.

Edit: actually, looks like its last years model so nearly new might be worth considering. Could get something £2-3k cheaper, or consider getting a Focus instead.

[chaplic]

TCP, veering slight off topic but the ecoboost engine is amazing - my parents have one. It even sounds good.

I didn't understand your comment re NIC

My understanding is:

Company pays lease (say £200PCM) so overall corp tax liability is less.


My accoutnant chap can do so black magic with a bit of the VAT to save tuppence.

I pay BIK (say 11% Of 20% of p11d) - I may have that the wrong way round but I'm sure you get the gist

Someone pays insurance (good points there)

What else is there to consider?

[SueEllen]

I'm now investigating going down the PCP route anyway to give myself the option of buying the car in 3 years, which, if business is good, should be easily covered by an extra divi. Test driving one of those new Ford Fiesta EcoBoost's tomorrow.

Just waiting for a scrap quote for my current car...my first car too. Sad day.

A car loses loads of its value in the first 2 years. Either keep leasing or just get a slightly older car. Not being the first owner won't kill you.

[TheCyclingProgrammer]

Thanks for the input all. Have decided I'm probably not going to go down the company lease route, mainly due to the insurance as mentioned above. I've had one quote and it was silly money.

I'm now investigating going down the PCP route anyway to give myself the option of buying the car in 3 years, which, if business is good, should be easily covered by an extra divi. Test driving one of those new Ford Fiesta EcoBoost's tomorrow.

Just waiting for a scrap quote for my current car...my first car too. Sad day.

[ContrataxLtd]

You would also lose your no claims discount after a maximum of 18 months....

Most insurance companies normally let you take out a personal policy on the company car provided they are aware of the actual ownership, who the registered keeper is etc. and it's correctly covered for business use. This way you can use and maintain your no claims discount.

If the company then pays for the policy it would need to go through payroll or P11d so it's probably easier to pay for the insurance premiums personally to avoid the added tax implications (although these can be worked around in most cases).

Hope this helps.

Martin
Contratax Ltd

[northernladuk]

You would also lose your no claims discount after a maximum of 18 months....

Very good point. This happened to me after I left permie land and had to give the company car back.

[eek]

I have just quickly done the calculation based on a lease cost of £2,087.28, a BIK value of £2,478.40 and dividends up to the higher rate threshold and you do come out slightly better off if you do it personally.

It can be very difficult (and expensive to insure a company car) in comparison to doing it personally, so that is definitely a factor to consider!

Craig

You would also lose your no claims discount after a maximum of 18 months....

[Craig at Nixon Williams]

I have just quickly done the calculation based on a lease cost of £2,087.28, a BIK value of £2,478.40 and dividends up to the higher rate threshold and you do come out slightly better off if you do it personally.

It can be very difficult (and expensive to insure a company car) in comparison to doing it personally, so that is definitely a factor to consider!

Craig

[TheCyclingProgrammer]

Well, I've run some figures using my modified salary calculator spreadsheet and if my calculations are correct, it looks like what they say is true re: leasing personally vs through company.

https://docs.google.com/spreadsheet/...2c&usp=sharing

By those calculations, on a 1.25 Ford Fiesta, leasing through the business would cost the company an extra £1350 a year after allowing for the extra Class 1A NIC and corporation tax saving, and also reduce our annual household take home £900 more than if I paid for the lease myself!

On that basis, the personal lease route looks like the right choice. My mortgage broker has also got back to me and said it shouldn't have too much of an affect on our mortgage application as the lender he has chosen has offered to lend more than we need anyway.

A more eco-friendly car might reduce the BIK charge a bit but the lease cost would be higher.

EDIT: looks like with a slightly eco-friendlier car and by sacrificing a portion of my salary I can get the costs down to be about the same without a reduction in take-home overall. Argh, so many variables to this...

Are there any other caveats I should be aware of when leasing through the company? Will it have a negative effect on insurance premiums? Anything else to consider?

[TheCyclingProgrammer]

I'm also strongly considering a lease as my car is currently in the garage and it may be terminal (possible timing chain jumped).

Everything I have read indicates that company cars aren't usually worth it but thinking it might be in my case. I have low mileage, approx 5K a year and very little business mileage. Would be looking at a low emissions car. Also, with a possible mortgage application on the cards would probably be best to not have a lease agreement in my own name.

Waiting to see what he accountant says.

[northernladuk]

SJD have an interesting comparison on their site but I don't think it gives you the answer you are looking for...

Buy, HP or lease? - Accountants UK - SJD Accountancy

Can you guarantee you will be doing low mileage for the next two years though? As soon as you go over the agreed amounts the payment per mile will ruin any saving.

[chaplic]

Evening All.

I do very few company miles and I am thinking of a new motor.

Lexus seem to do some cracking deals on their hybrid cars in terms of business lease (e.g. they are advertising a cooking model at £219pcm + VAT) plus BIK around 11%, so if one can stay in 20% tax bracket then seems to me to be a new motor for not very much at all - couple of hundred bucks or so expense to the firm and less than a hundred bucks a month in BIK?

This all feels too good to be true which leads me to think of something I've missed. I've read many threads on here where the focus is on buy private and expense back, but that wouldn't really get me far here so looking for the assembled big brains here to tell me the errors of my ways.. (Or I'm a genuis and thought of something that noone else has)...