If you\u2019re a company director in the UK, you might be thinking about buying a car through a limited company.<\/p>\n\n\n\n
Well, we\u2019ve got some good news. You can get a new set of wheels and take advantage of some tax benefits at the same time. But, there are a few things you’ll need to know first.<\/p>\n\n\n\n
So, let\u2019s explore the ins and outs of buying a car through your limited company<\/p>\n\n\n\n
In short, yes! You can buy a car through your limited company.<\/p>\n\n\n\n
When you do, the car is in your company\u2019s name. And this makes it a company asset. This means it should mostly (if not entirely) be used for business purposes. <\/p>\n\n\n\n
So, whether you’re heading to an important meeting or to visit a customer, buying a company car makes perfect sense.<\/p>\n\n\n\n
And here\u2019s the best part \u2013 there are some great benefits of buying a car through a limited company. Let\u2019s take a closer look.<\/p>\n\n\n\n
When buying a car through your limited company, you can enjoy some great tax perks. Any costs associated with the car can be deducted from your company’s profits, which reduces your corporation tax<\/a> bill.<\/p>\n\n\n\n Here are some allowable expenses for limited company directors<\/a> you can include in your next company tax return<\/a>:<\/p>\n\n\n\n You can also claim a capital allowance <\/a>for the cost of a car bought for business use.<\/p>\n\n\n\n The rate of these allowances depends on whether the car is new or used, and its CO2 emissions. <\/p>\n\n\n\n Here\u2019s how this works for cars purchased since 2021:<\/p>\n\n\n\n New electric cars with 0g\/km CO2 emissions:<\/strong><\/p>\n\n\n\n Used electric cars with 0g\/km CO2 emissions; or low-emission cars with 1-50g\/km CO2 emissions:<\/strong><\/p>\n\n\n\n High-emission cars with over 50g\/km CO2 emissions:<\/strong><\/p>\n\n\n\n There\u2019s more on this on the HMRC website<\/a>.<\/p>\n\n\n<\/div> \n\n Our accredited accountants can help you figure out the best way to stay tax-efficient when it comes to your company and company car!<\/p>\n<\/div>\n <\/div>\n\n \n \n Is your company VAT<\/a>-registered? If so, you can also reclaim any VAT on the purchase price and running costs of the car.<\/p>\n\n\n\n Depending on the industry you\u2019re in, a branded company car could boost your image! Add your logo and company colours to the car and you\u2019ll have an advertisement for your business on 4 wheels!<\/p>\n\n\n\n If you travel often, a company car helps to simplify your expense tracking. This makes it easier to separate your business and personal spending.<\/p>\n\n\n\n Like for every other car, you need to stay up to date with the upkeep of your car. This includes regular maintenance like getting your MOT and service annually, making sure you\u2019re paying your road tax and having valid car insurance. <\/p>\n\n\n\n Road tax is sometimes also called vehicle tax, Vehicle Exercise Duty (VED), or car tax.<\/p>\n\n\n\n There are a few things you\u2019ll need to be aware of before purchasing a company car:<\/p>\n\n\n\n If you also use your car in your personal life, you\u2019ll need to pay BIK tax<\/a>. This is calculated based on:<\/p>\n\n\n\n This can sometimes outweigh any tax savings. BIK rates are a little more complex than tax deductions, but you can learn more about this here.<\/a> If your vehicle is for company use only, you\u2019re off the hook when it comes to BIK tax.<\/p>\n\n\n\n Usually, insurance premiums for company cars are higher than for personal cars. So it\u2019s worth checking insurance rates before you buy the car.<\/p>\n\n\n\n The depreciation of your car could affect your company\u2019s financial statements. Depreciation is a tax-deductible expense (woo), but it can also reduce the value of your company\u2019s assets (boo).<\/p>\n\n\n\n If you\u2019re ready to buy a car through your limited company, here are a few simple steps to follow:<\/p>\n\n\n\n Before you dive right in, it\u2019s really important to make sure you\u2019ve weighed up the tax benefits and costs we\u2019ve touched on above. You\u2019ll also need to think about the type of car you\u2019re going to buy.<\/p>\n\n\n\n Make sure you register the car in the company\u2019s name and keep a record of everything. You\u2019ll need this for your corporate tax return<\/a>. You\u2019ll also need to keep a record of any associated costs, like insurance and fuel. And don\u2019t forget your MOT or vehicle tax!<\/p>\n\n\n\n Last but not least, HMRC would like to stay in the loop. So don\u2019t forget to notify them about your new company car.<\/p>\n\n\n<\/div> \n\n\n
2. Claim capital allowances<\/h3>\n\n\n\n
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Get professional help with your company car<\/h2>\n\n \n \n
3. Get your VAT back<\/h3>\n\n\n\n
4. Improve your company image<\/h3>\n\n\n\n
5. It\u2019s sometimes more practical<\/h3>\n\n\n\n
Remember\u2026<\/h2>\n\n\n\n
But wait, is there a catch?<\/h2>\n\n\n\n
You could pay benefit-in-kind (BIK) tax<\/h3>\n\n\n\n
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Insurance costs are often higher<\/h3>\n\n\n\n
Depreciation can play a part<\/h3>\n\n\n\n
How to buy a car through your limited company<\/h2>\n\n\n\n
1. Make sure it\u2019s the right decision<\/h3>\n\n\n\n
2. Get your documents in order<\/h3>\n\n\n\n
3. Let HMRC know<\/h3>\n\n\n\n