Electric car

[LateContractor]

Hi all,

I am newish to the contracting world (< 2 years) and getting used to some of the allowable expenses etc.

I am looking to get a car and would like to understand if my understanding is correct:

• I am likely to be in the higher tax band either by contracting or being perm and thus would have to pay the 32.5%
• My calculation of buying a £41k company car would only be worth £22,140 if I took it out as dividends at the higher tax rate (41 * 0.8 * 0.675)
• With the BIK tax being low for the next few years (0% - 2%), I personally wouldn't have to pay much personal tax
• Therefore buying a £41k car through the company would be the same as a £22k car if I took the money out to buy it personally at the higher rate

If this is the case, is there a reason a number of contractors are not doing this currently?

Thanks for any help!

[cojak]

Hi all,

I am newish to the contracting world (< 2 years) and getting used to some of the allowable expenses etc.

I am looking to get a car and would like to understand if my understanding is correct:

• I am likely to be in the higher tax band either by contracting or being perm and thus would have to pay the 32.5%
• My calculation of buying a £41k company car would only be worth £22,140 if I took it out as dividends at the higher tax rate (41 * 0.8 * 0.675)
• With the BIK tax being low for the next few years (0% - 2%), I personally wouldn't have to pay much personal tax
• Therefore buying a £41k car through the company would be the same as a £22k car if I took the money out to buy it personally at the higher rate

If this is the case, is there a reason a number of contractors are not doing this currently?

Thanks for any help!

Have a look at this thread: https://www.contractoruk.com/forums/...rough-ltd.html

[jayn200]

Yeah I think probably you should lease not buy but otherwise your assumptions are mostly correct as far as I know. You have to remember there is a huge premium for EVs, they are usually around 50% more expensive than diesel/petrol models which may discourage some people from purchasing them but with the 0% BIK every contractor who is looking to buy probably will go in that direction.

I picked up on something you said too, I am curious if you take out all the money in your company as dividends? That is not tax efficient you should consider only taking out 50k a year (salary + dividends) and stay in the basic tax bracket. You should model your lifestyle/household costs around this if you can. The rest of the money you can either put in a pension or leave in the company for when you are out of contract and/or when you are done contracting and liquidate the company where you can take it all out using ER at a low tax rate.

It hurts to take out any money at 32.5%, honestly if you're going to do that may as well just go for inside ir35 contracts and go through an umbrella.

[TheDogsNads]

Hi all,

I am newish to the contracting world (< 2 years) and getting used to some of the allowable expenses etc.

I am looking to get a car and would like to understand if my understanding is correct:

• I am likely to be in the higher tax band either by contracting or being perm and thus would have to pay the 32.5%
• My calculation of buying a £41k company car would only be worth £22,140 if I took it out as dividends at the higher tax rate (41 * 0.8 * 0.675)
• With the BIK tax being low for the next few years (0% - 2%), I personally wouldn't have to pay much personal tax
• Therefore buying a £41k car through the company would be the same as a £22k car if I took the money out to buy it personally at the higher rate

If this is the case, is there a reason a number of contractors are not doing this currently?

Thanks for any help!

No, I dont think buying a £41k car via the company is the same as buying a £22k car personally.

But, you should consider other things.

An EV may suit your needs for the current contract if it is close to home. Will it be for the next contract if you have to stay away from home? What would the charging infrastructure be like where you were staying \ working?

You might have been fortunate with contracts in the last couple of years but, what about the future in a market lots of contractors are struggling to find work? What if you decide to stop contracting,close your limited and go perm during the car purchase \ lease term where the agreement is in the company name?

[jayn200]

No, I dont think buying a £41k car via the company is the same as buying a £22k car personally.

But, you should consider other things.

An EV may suit your needs for the current contract if it is close to home. Will it be for the next contract if you have to stay away from home? What would the charging infrastructure be like where you were staying \ working?

You might have been fortunate with contracts in the last couple of years but, what about the future in a market lots of contractors are struggling to find work? What if you decide to stop contracting,close your limited and go perm during the car purchase \ lease term where the agreement is in the company name?

I don't think I agree. 41k will buy an EV with sufficient range to travel from north to south of England on a single charge, you then just plug it in at destination and it charges while you're on site. I doubt anyone is getting contract work in the countryside where there are no chargers.

But good point about having to close down company

[mjcp]

An EV may suit your needs for the current contract if it is close to home. Will it be for the next contract if you have to stay away from home? What would the charging infrastructure be like where you were staying \ working?

SWMBO has a 100 mile a day commute. The saving in fuel covers the cost of the HP to buy the i3 she has. The extra 'leccy on the home bill is (maybe) £30 a month. Cheapest commute she's ever had and she get she effectively gets a car free... (well, £30). There's no charge at the work end, so we picked a range extender version just in case. The new models have a bigger battery that would easily cover the 100 miles with spare capacity.

Its rare that we do more than 150 miles in a day (battery + Rex = 180miles on paper), and if we go on holiday / longer trip, we either take my petrol car or rent an estate/suv. If I wasn't a petrol head, I'd happily have a an electric car as my daily. If I was blind, I might buy a Tesla.

M

[TheDogsNads]

I don't think I agree. 41k will buy an EV with sufficient range to travel from north to south of England on a single charge, you then just plug it in at destination and it charges while you're on site. I doubt anyone is getting contract work in the countryside where there are no chargers.

But good point about having to close down company

I agree a number of EVs have a range getting on for 300 miles. In summer. Winter it is going to be less. The thing is while London may have a good charging infrastructure, the further north you go, less so. We dont know what and where the OP's commute is going to be like.

Im fully on board with EVs. Id almost have one tomorrow if the charging infrastructure in my location was even 50% that of London and, manufacturers standardised the DC charge function and plug type.

[WTFH]

... then just plug it in at destination and it charges while you're on site. I doubt anyone is getting contract work in the countryside where there are no chargers.

OK, works great if your client has chargers in the car park you are allowed to use, or the hotel has chargers.
Not so great if they don’t, or you have to run a cable from a 2nd floor hotel room/office out to your car.

[jayn200]

OK, works great if your client has chargers in the car park you are allowed to use, or the hotel has chargers.
Not so great if they don’t, or you have to run a cable from a 2nd floor hotel room/office out to your car.

Map of charging points for electric car drivers in UK: Zap-Map

There are rapid chargers in every city. You don't need to plug in on site. That should cover 99% of contractors in this forum as most are not visiting remote sites/villages.

I know a lot of the 50+ crowd will never get rid of their diesel cars until they are forced to, but range anxiety isn't a valid reason anymore, especially when purchasing a 40k+ EV which will have a proper battery with good range. It's a small country, it's not like anyone is doing 500 miles a day. If they are then sure they can consider something else but that is less than 1% of people on this forum.

[WTFH]

Map of charging points for electric car drivers in UK: Zap-Map

There are rapid chargers in every city. You don't need to plug in on site. That should cover 99% of contractors in this forum as most are not visiting remote sites/villages.

I know a lot of the 50+ crowd will never get rid of their diesel cars until they are forced to, but range anxiety isn't a valid reason anymore, especially when purchasing a 40k+ EV which will have a proper battery with good range. It's a small country, it's not like anyone is doing 500 miles a day. If they are then sure they can consider something else but that is less than 1% of people on this forum.

I doubt your figures that 99% of contractors on this forum meet your claim.
I would also argue that if you can only accept a contract where there’s charging points near the client site, you’d be better off going perm.
And the range of a car varies depending on the driving conditions. Sure it might do 200 miles (London to Leeds), not “the length of the country”, but the range drops if you go faster, or are chugging along in traffic with the aircon on.
As for the 50+ brigade, we don’t all drive diesels.