Purchasing a vehicle personallyContrary to popular belief, there are no immediate tax deductions available on the initial purchase price or finance costs when buying a car. In addition, there is no tax relief available on the vast majority of standard running costs, which include servicing, fuel, insurance and tax. However, you may be eligible to claim a tax-free allowance for business mileage. This business mileage tax relief is calculated in such a way as to also cover vehicle running costs, including general maintenance and depreciation. As it stands today, UK businesses can charge their companies reimbursement expenses of 45p a mile for the first 10,000 business miles each year for a business car or van. This then reduces to 25p for every qualifying business mile after this initial allowance. Total business mileage for every year starts on April 6.
Purchasing a car through your businessTax relief and liabilities when purchasing a car through a company in the UK vary in accordance with the way the vehicle is financed. For example, if you purchase a vehicle through your company using a hire purchase agreement, the only acceptable company expenses are the interest payments. However, your company can also claim Capital Allowances?to reduce the overall costs of the vehicle by reducing taxable profit. If you choose to lease a vehicle with no intention to purchase it, all monthly leasing costs can be claimed as expenses for your business. Additional levies apply for vehicles with CO2 emissions above 110g/km (2018/19)?or 130g/km for 2017/18 – a flat rate disallowance of 15% of the monthly payments.
Purchasing a van through your businessIt’s a slightly different story with vans, which for tax purposes are classified as plant and machinery. As a result, purchasing a van through your business entitles you to a deduction of 100% of the purchase price, under the Annual Investment Allowance regime. In order to qualify, the van must be used for an insignificant” amount of private use, which according to HMRC would include things like stopping at the doctor’s surgery or pharmacy on the way home from work. By contrast, if the van you purchased was used to go shopping on a regular basis or for general leisure trips, it would not qualify for this 100% deduction.
Comparing car finance dealsIrrespective of your requirements for the vehicle, it is important to compare car finance deals from as many lenders as possible. Use a car finance calculator to establish your budget and requirements, before taking your case to an independent specialist. Working with an independent broker means gaining access to the widest possible network of specialist lenders across the UK. It also opens the door to the kind of independent advice and consultancy you wouldn?t receive from any specific lender directly. Particularly where vehicles for business purposes are concerned, tax liabilities and relief can be a complex subject. In order to ensure you make the best possible decision for your business, it’s advisable to speak to an experienced specialist, before deciding which way to go.
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