Are you thinking about buying a new car? Maybe your old one is about to break down for good, or it has already broken down and upgrading it is a better option compared to getting it repaired again. If a new car is something you are thinking about investing in, there are lots of different options to consider whether you buy a new car, a used car, outright, or on finance. Another factor to consider is your business. If you often use your car for work purposes, is buying your car through your business a better option? You might be wondering if it’s a step that might save you money or if there are any tax benefits to be had. Whether or not buying a car through your business is a good idea will depend on the amount of business vs personal use of the car and the business structure.
Capital Allowances
When you purchase a car through your business from Peterborough used cars, it is classed as a fixed business asset, which means that you will be able to claim capital allowances on its purchase value. However, bear in mind that the capital allowances for tax are not as generous as other types of machinery and equipment. This is because cars are judged on the amount of CO2 emissions that they emit. Along with this, if there is an element of personal use, this needs to be deducted from capital allowances too. There are no capital allowances for lease or hire vehicles, but you can claim them if you buy the car on finance as long as it is, or eventually will be, owned by your business.
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Claiming for Car Expenses and Benefits in Kind
When it comes to what you can claim for motoring expenses, there are some differences depending on whether your business is run as a sole trader or partnership or through a limited company. If you operate through a limited company, benefits in kind is an important consideration since company directors are considered to be an employee of the business. If you buy a vehicle through your limited company, it belongs to the company rather than to you. However, this does not apply to sole traders as in this case, the business and its owner are classed as the same legal entity. If you are a director of a limited company and make personal use of a company vehicle, this is classed as a benefit in kind and is liable for tax and NIC. The amount will vary depending on the make, model, and age of the vehicle along with the CO2 emissions and fuel type.
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VAT
When purchasing a car through your business, the VAT that you can claim is quite restricted. To claim VAT, it must be a car that has never had any personal use such as a previous pool car or a brand new car, and that the car will be used exclusively for business purposes and not used for any personal use.
If you want to buy a new car and are considering buying it through your business, there are a lot of considerations to make.
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