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Benefits of Buying a Company Car Through a Limited Company

If you’re a business owner, purchasing a company car for your business can be a significant investment. However, there are several benefits to buying a vehicle through a limited company. In this article, we’ll explore the four options available to you and the advantages of each.

Option 1 – Standard Car

If you purchase a standard car through your limited company, VAT is not reclaimable, and capital allowances are limited. Additionally, the P11d tax to the employee is dependent on the C02 and list price of the vehicle. This option may be costly for both the employer and employee, particularly for high-emission vehicles.

Option 2 – Commercial Vehicle

If you purchase a commercial vehicle, such as a van, through your limited company, VAT is reclaimable (if VAT registered), and capital allowances are allowable. The P11d tax to the employee is capped at a low level because the vehicle is commercial. This option is very tax-beneficial, and there are lower tax implications for the employer.

Option 3 – Electric Vehicle

If you purchase an electric vehicle through your limited company, VAT is not reclaimable, but capital allowances are enhanced due to HMRC electric policies. The P11d tax to the employee is very low because it is based on C02, which is 0%, and the percentage is capped at 2%. This option is very tax-beneficial for both the employer and employee.

Option 4 – Claim Mileage

If you choose to claim mileage from the employee to the employer at 45p per mile, VAT is reclaimable (if VAT registered), capital allowances are not applicable, and there is no P11d tax to the employee. This option is the simplest approach as a cost.

Conclusion

Overall, purchasing a vehicle through a limited company can be a tax-efficient option. The most tax-beneficial option will depend on the specific circumstances of your business. If you’re unsure which option is best for you, it’s advisable to seek professional advice.

For more information on how eAccounts can help you with tax-efficient solutions for your business. Please contact us on 02921 056209 alternatively email admin@e-accounts.co.uk

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