New car on PCP or lease - tax question New car on PCP or lease - tax question - Page 2
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  1. #11

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    Quote Originally Posted by SandyD View Post
    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a the car, so my options are to: either withdraw cash from company and buy it personally, then pay very high tax on the withdrawn money.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.
    I don't know where to start here, but YourCo. will not be better off by £4k. If you are the source of YourCo.'s revenue, then ultimately you are worse off? You cannot possibly be better of by spending "your" revenue on a depreciating asset and paying BIK on it. Depreciation is a non-cash deduction, in any event.

    Get a personal loan if you don't want to pay the Tax on the dividend and claim the 45p per mile. BIK on Company Cars does not make sense.

    Speak to your Accountant?
    I was an IPSE Consultative Council Member, until the BoD abolished it. I am not an IPSE Member, since they have no longer have any relevance to me, as an IT Contractor. Read my lips...I recommend QDOS for ALL your Insurance requirements (Contact me for a referral code).

  2. #12

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    Quote Originally Posted by Ebenezer View Post
    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.
    Little be condescending isn't it? There's nothing wrong with fixed price motoring if you can afford the monthly payments. Just because it's not the most efficient way of doing things over a time period doesn't mean it's wrong - it's also hassle free and no stress.

    And I speak as someone driving around in the £3500k car we purchased 5 years ago!

  3. #13

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    Quote Originally Posted by vwdan View Post
    Little be condescending isn't it? There's nothing wrong with fixed price motoring if you can afford the monthly payments. Just because it's not the most efficient way of doing things over a time period doesn't mean it's wrong - it's also hassle free and no stress.

    And I speak as someone driving around in the £3500k car we purchased 5 years ago!
    It is less risk of hassle, and perhaps will result in reduced stress.
    New cars go wrong as well. New cars don't reduce stress in and of themselves.

    It is a personal choice. I did it once and will never do it again. It was nice to have a new car, but when I handed it back all I could think was that for the same money I'd own a nicer, older car outright.
    I then bought an older, nicer car, for the same money as a 2 year lease. I've had it 2yrs and 3 months now (so it's paid for itself) and intend to get another 2 years from it.
    See You Next Tuesday

  4. #14

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    Quote Originally Posted by vwdan View Post
    And I speak as someone driving around in the £3500k car we purchased 5 years ago!
    Guessing you didn't mean to add the "k" on the end of your car cost?! Otherwise the PCP brigade could teach you a thing or two about being frugal

  5. #15

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    Quote Originally Posted by Lance View Post
    It is less risk of hassle, and perhaps will result in reduced stress.
    New cars go wrong as well. New cars don't reduce stress in and of themselves.

    It is a personal choice. I did it once and will never do it again. It was nice to have a new car, but when I handed it back all I could think was that for the same money I'd own a nicer, older car outright.
    I then bought an older, nicer car, for the same money as a 2 year lease. I've had it 2yrs and 3 months now (so it's paid for itself) and intend to get another 2 years from it.
    New cars do - but if it's on PCP or a lease it's not your problem. Especially the latter because you're not even worrying about "warranties". To me, that massively reduces any stress because I just don't care or worry about. Worst case, if it breaks down, we call the RAC and somebody fixes it and we have a courtesy car or a rental in the meantime.

    Like I say, I can see both sides - and I mean that quite literally. When I'm up and down the country, away from home, I like the fact my Mrs (with the little one) has a nice lease car where any drama is somebody elses problem and issues are unlikely.

    For me, I'm more content with an older car and saving cash. I'm actually due a new motor and I'll probably just buy something silly for a few grand like another V6 Jag that I sold last year, but I'm happy looking after the fixing it bits myself and I'll cope if it breaks down somewhere.
    Last edited by vwdan; 14th September 2018 at 09:41.

  6. #16

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    Quote Originally Posted by SandyD View Post
    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.
    I see others have chipped in with some of the flaws on your comments but I hope it works out for you 🙂

    Let us know how you get on driving that car off the forecourt and losing cash straight off (Car depreciation | AA).

    Buy a used car and run it to the death, rinse and repeat or lease.

  7. #17

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    Agreed, but please don’t buy a knackered old Jag like the poster above as this will turn you into

    1. That bloke in the pub who bangs on about how his Jag cost less than a new Ford Fiesta
    2. That bloke waiting for the AA in the freezing rain by the side of the M6, smug in the knowledge that all the sensible people in new Fiestas who are zooming past him are subsidising his AA membership

  8. #18

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    Quote Originally Posted by Ebenezer View Post
    Agreed, but please don’t buy a knackered old Jag like the poster above as this will turn you into

    1. That bloke in the pub who bangs on about how his Jag cost less than a new Ford Fiesta
    2. That bloke waiting for the AA in the freezing rain by the side of the M6, smug in the knowledge that all the sensible people in new Fiestas who are zooming past him are subsidising his AA membership
    Old, not knackered £1000 and that bad boy took me up and down the country, drama free!

    I'll concede Point 1

  9. #19

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    Yes I agree and everyone knows if you have the ability to fund a car purchase from your personal funds, then this is the most tax efficient way.

    But assuming you have no other income but from your Co, then this personal fund would have been taken out of your Co, and already paid the SA tax on it So if buying a new car for £30K, and you took this money out of the co, then this purchase already cost you £12K at 40% or £6K at 20%

    If the car is purchased buy your company, you'd be paying extra BIK(depending on the CO2 emission) something like 3K a year for BIK (as long as the PCP is running, lets assume its for 2 years)
    Your Co will also pay NI around 1K

    On the other hand, your Co will claim less tax due to depreciation of 4 to 5K a year ( lets say for 2 years)

    The reason I am going for a new car is that from my research into Hybrid cars, with long warranty e.g. 5 years like in the case of Toyota, the difference in the price of a new and nearly new (e.g. 1 year old) is very minimal , something like 2 to 3K difference, yes this was a surprise for me, but with a new car, there is a 2 year interest free PCP - that gives me a chance to save for the end sum payable aat the end of the 2 year interest free.

    In addition, for a used car, the exchange for my old banger (which I drove to death for the last 11 years) would be a few hundreds if not less as the engine in my present car is not running well, but if I purchase a new car using the car scrap scheme I can get anything between 2.5K and even more (depending on the car you are going for)

    So Cons:
    -Paying BIK
    (you could do capital contribution to reduce your BIK)

    Pros:
    - Have 2 year interest free PCP (by buying a new instead of used)
    - Get at least 2.5K for my old car
    - Co claims up to 5k depreciation for 2 years (offset the cost of the vehicle against Corporation Tax )
    - All car expenses e.g insurance, road tax, service etc etc is covered by company
    (apart from Fuel, so its not worth Co paying for the fuel as that would incur extra BIK)


    Again... yes if you have the cash price for a car sitting in your personal account, this would be the best way, but if you don't, then buying a company car may not be a bad option compared to taking the full car price as divs.

    Look forward to your replies, I don't mind anyone pointing out my ignorance and issues with the above logic, if there is anything I missed please go a head and point it out.

  10. #20

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    I don't think people are saying instead of getting a company leased car you should buy a brand new car personally. They're saying you should buy a 5-10 year old car personally. Plenty like that which will still be running fine for years, and only cost a few £k to buy, plus you still get to claim 45p/mile for business miles even though the depreciation is now trivial.

    Company car is fine if you definitely want a shiny new car regardless...but don't be tricked into thinking it's the most financially efficient option just because your company gets some tax relief.

    I wrote a blog post with my views on company cars here. It's a couple of years old, but the bulk of the logic still holds true.

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