Does a Company Director Need to Justify a Company Car?

[Ultrabeat]

As the title states, does a Company Director need to justify having a Business lease for a car? I will probably do less than 5% of my miles related to business activities.

I am looking to go down this route as I run a Limited Company side hustle that I have as yet taken any money from in 2 years, and getting an electric vehicle on a Business lease is quite a tax efficient was for me to get some value from my business.

 

[Lisa Thomas]

I wonder if this might be better placed under the accountancy forum.

 

[DWS]

As the title states, does a Company Director need to justify having a Business lease for a car? I will probably do less than 5% of my miles related to business activities.

I am looking to go down this route as I run a Limited Company side hustle that I have as yet taken any money from in 2 years, and getting an electric vehicle on a Business lease is quite a tax efficient was for me to get some value from my business.

Would the car not just be treated as remuneration for their role as a Director?

 

[Ultrabeat]

Would the car not just be treated as remuneration for their role as a Director?

That is what I thought, but does this mean the cost of the lease is classed as payments to the Director or does only the BiK apply to personal taxation

 

[Mike MD]

As the title states, does a Company Director need to justify having a Business lease for a car? I will probably do less than 5% of my miles related to business activities.

I am looking to go down this route as I run a Limited Company side hustle that I have as yet taken any money from in 2 years, and getting an electric vehicle on a Business lease is quite a tax efficient was for me to get some value from my business.

No - you don't need to justify having a business lease for a company car. As there is private use, you will have to pay tax on it as a "benefit in kind". This BIK is currently 2% of brand new list price of the car until 2025 (not what you paid for the car). So if the car was £50,000 new, then you would have a BIK of £1,000 and pay tax on this of whatever your personal tax rate is, which depends on your total income.

You do not have to treat the payments to buy the car as your salary - just make sure the car is bought by the company (even if you need to personally guarantee the lease).

As an added bonus, the business can pay you 10p per mile for driving on company business (not commuting though). If you charge at home you should be able to pay 1/3 of that.

It is really really tax efficient to have an electric company car just now.

 

[Ultrabeat]

No - you don't need to justify having a business lease for a company car. As there is private use, you will have to pay tax on it as a "benefit in kind". This BIK is currently 2% of brand new list price of the car until 2025 (not what you paid for the car). So if the car was £50,000 new, then you would have a BIK of £1,000 and pay tax on this of whatever your personal tax rate is, which depends on your total income.

You do not have to treat the payments to buy the car as your salary - just make sure the car is bought by the company (even if you need to personally guarantee the lease).

As an added bonus, the business can pay you 10p per mile for driving on company business (not commuting though). If you charge at home you should be able to pay 1/3 of that.

It is really really tax efficient to have an electric company car just now.

Thanks, Mike. That's really helpful.

I just read something that said that my Limited Company will have to pay NI contributions on the value of the Benefit. Is this correct, and if so how does it work?

 

[Mike MD]

Thanks, Mike. That's really helpful.

I just read something that said that my Limited Company will have to pay NI contributions on the value of the Benefit. Is this correct, and if so how does it work?

Yes, that is correct. It's due 6 July after the end of the tax year. It is calculated at 13.8% of the Benefit in Kind value - so in the above example, that would be £138 in a full year.



It is worth either asking an accountant as they can take all your circumstances into account, or really having a good google, sticking mainly to HMRC information and gov.com...

 

[Ultrabeat]

Yes, that is correct. It's due 6 July after the end of the tax year. It is calculated at 13.8% of the Benefit in Kind value - so in the above example, that would be £138 in a full year.



It is worth either asking an accountant as they can take all your circumstances into account, or really having a good google, sticking mainly to HMRC information and gov.com...

That's great, thanks. again.

Looks like it works out at £121 for the year based on £44,000 car with a BiK of £880 for the next two year.

Only had a Limited Company 2 years, but I am quickly learning there is a tax on everything!

 

[WaveJumper]

You might be interested in having a read of this:

Is a Company Car Right for You? A Director's Guide

Discover whether a company car is worth it for directors. Learn about costs, tax implications, and financial impact on personal finances.

jaccountants.co.uk

 

[Paul Kelly ICHYB]

Only had a Limited Company 2 years, but I am quickly learning there is a tax on everything!

Have you learnt that employing the service of an accountant is a great investment?

 

[WaveJumper]

Have you learnt that employing the service of an accountant is a great investment?

A very recurring topic ?

 

[Ultrabeat]

Have you learnt that employing the service of an accountant is a great investment?

I have an accountant, but does my accountant find every possible way to save me on taxation? That I am not sure on.

 

[Paul Kelly ICHYB]

If they don't, find one that does!

 

[JEREMY HAWKE]

You dont have to justify a company car but you do have to justify on here why you drink avocado coffee and drive electric cars ?

 

[HFE Signs]

You don't need to justify it, but you might find you're better off buying it yourself and claiming expenses, check with your accountant.

 

[Mark T Jones]

I have an accountant, but does my accountant find every possible way to save me on taxation? That I am not sure on.

This is 100% an accounting question - to get a good answer will require the advisor to have all the relevant detail, including detail of the car itself.

If you don't trust your current accountant you need a new one.

 

[WaveJumper]

Claiming for a new boat could throw up a few problems .........thinking if I said it was for marketing purposes or my new office, would be much better than a shed in my garden, and I must check with accountant on Monday would I have to pay tax if I was trading out in international waters ?

 

[Jimmy24]

I see no problem with this if your the director then go for it