Are you thinking of buying a car through your limited company?

Although this may seem like a good idea, there are tax consequences which may make the costs outweigh the benefits. The purpose of this blog is to explore the questions that should be asked before you make your decision.

Before deciding whether or not to purchase a company car, the questions you need to ask yourself are:

Will the car be used 100% for business purposes?

If the answer to this question is no, it is unlikely that it will be tax efficient to purchase it through your limited company.

This is because private use is considered a “Benefit in Kind”. The company will be required to pay class 1A National Insurance on the value of the benefit. You may also have to pay Income Tax on the benefit.

Benefit in Kind value is calculated by multiplying the list price of the car (including any accessories fitted before the car was first made available) by its CO²emissions percentage.

To calculate the taxable value of the car you are considering, follow this link:

http://cccfcalculator.hmrc.gov.uk/

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