Contractors' Questions: Cars: Company vs. private?
Contractor Question: Car - company v private?
Am I better off treating my car as company owned or privately owned? I'm paying around £330/month finance, so with servicing, insurance, road tax and breakdown cover, the cost is around £5k/yr. Annual mileage around 20k, 90% of it business. I am tempted to treat it as a company car but for tax purposes not pay for private mileage. Is this a good option?
Answer.. Kindly provided by Danbro Accounting
Generally speaking company cars ceased to be tax efficient once the basis for calculating their taxable benefit changed to the level of the car's CO2 emissions, rather than the amount of business mileage traveled by the individual.
Without knowing the full details of your car and personal tax situation I would expect that the most tax efficient way to run your car for business is to own it privately and then charge the Inland Revenue approved mileage allowance when using it on business.
You state that your level of annual business mileage is 18,000 miles, which under the approved mileage scheme, would entitle you to claim £6,000 from your company for use of your private vehicle for business purposes.
No income tax or national insurance contributions would be payable on this amount, which would provide a significant contribution in covering the running costs of the car. However, the final decision may be different given the full set of circumstances and so it is always wise to fully discuss the situation with your accountant first.