Lease car - Sole Trader (VAT Registered)

[WB-EU]

Hi everyone,


Looking to change my car as my current Audi has high mileage and will likely need some parts replacing this year such as cluth and flywheel which is pricey, looking to sell and lease a new car (Mercedes or Audi).

My question is which is better personal or business?
I am a sole trader and VAT registered, my current car is personal and I pay £225 pm loan which is nearly up, I am looking at a new Mercedes for £300 pm, the saving on tax and fuel will bring it near the same I am paying now so no problems.

Judging on the info given which do you think would be better, business is slightly cheaper which is a bonus but I would prefer to do it personally then it comes out my own account so less hassle I believe.

Thanks in advance.

 

[Lease4Less]

You are a vat registered Sole Trader so you can claim the Vat back regardless of whether you lease the vehicle on a Business Contract Hire or a Personal Contact Hire.

 

[WB-EU]

So is it virtually the same whether I go business or personal?

No benefits to one?

 

[WB-EU]

Also just wondering if you offer a price match service on your vehicles?

 

[Lease4Less]

It depends on a number of factors, mileage being a large one in your case.
You can claim the 50% of the Vat back on the monthly rental, (not 85% - thanks Nicola!) and offset the monthly payment against your taxable profits.

As you are a Sole Trader you don't pay any BIK tax, so keeping it out of the business for that reason is pointless. You can also claim tax & Vat relief on Maintenance & Tyres.

Treating it personally and billing the business for mileage rather than claiming the Vat back and offsetting the rental might be more tax efficient if you were doing a large annual mileage, but based on the price you posted above, I'd guess you are only doing 10K - 15K per annum.

 

[Lease4Less]

Also just wondering if you offer a price match service on your vehicles?

I'd need to see the quotation - you can email it to me at [email protected] and I'll get one of my consultants to have a look for you.

 

[MyAccountantOnline]

OP you dont say what business you are in but generally most soletraders can only claim 50% VAT on car leases - have a read here. Something to bear in mind when you are doing the calculations.

 

[Lease4Less]

Nicola is quite right about the Vat (that will teach me not to proof read my posts), the 85% I mentioned aboved relates to the amount of monthly rental you can allow against your taxable profits, subject to the vehicle having CO2 emissions of 130 or greater.

 

[MyAccountantOnline]

Nicola is quite right about the Vat (that will teach me not to proof read my posts), the 85% I mentioned aboved relates to the amount of monthly rental you can allow against your taxable profits, subject to the vehicle having CO2 emissions of 130 or greater.

I was just typing a reply suggesting you may have confused the 15% restriction for cars with Co2 emissions above 130 g/km for tax purposes with the VAT recoverable

 

[WB-EU]

Thanks both for the responses,

Yes around 10k is my annual mileage, the car will mainly be used for my other company which is a high end bike shop, I do majority of my miles (business) with this. maybe 8k a year, picking up and dropping things off, rest of the mileage is pottering about personally, I have my bicycle and motor bike for summer months.

The cars I am looking at are below 130 g/km, how much of a difference does this make?

I presume lower emissions is better?


Thanks again

 

[Lease4Less]

If the CO2 emissions are below 130 g/km then 100% of the monthly rental is allowable, including the blocked Vat element (this is the portion of the Vat that you cannot claim back)

 

[Talay]

Let us not forget that being able to offset it against tax does not make it "free". Taxation would only be 20% of the amount spent on the vehicle.

 

[Pish_Pash]

I am a sole trader and VAT registered, my current car is personal and I pay £225 pm loan which is nearly up, I am looking at a new Mercedes for £300 pm, the saving on tax and fuel will bring it near the same I am paying now so no problems.
.

Perhaps I'm the mad one...but doesn't it strike you as being a bit of a burden constantly paying between £225pm-£300pm on a car?

 

[Talay]

Perhaps I'm the mad one...but doesn't it strike you as being a bit of a burden constantly paying between £225pm-£300pm on a car?

A whole range of issues come into the mathematics but there are times when models which do not depreciate much and where you do not need to add any extras (as you pay for these in full but receive no credit) cost less than buying and selling over the term of the lease.

However, go longer term and the maths breaks down and heavily favours a purchase. That said, go even further into the deal and with repairs coming into view, the balance can shift back to leasing a new one again. Thus, a new vehicle every 3 years or so can ease cashflow and actually be the cheapest option.

 

[Pish_Pash]

I don't need to do any maths to tell me that I'm going to lose wads whether I a) buy a new car or b) lease a new car over 3 years. But hey horses for courses ....incidentally, I think your earlier comment about offsetting not meaning free money is bang on !