Company Van or Company Car?

Van is better from the tax point of view.

You are not able to buy the vehicle outright?

Thanks Peter.

Outright through my company?

Yes I am able to buy the vehicle (van or car) outright via my company, would this be a better option?

Jach

Isn't that about to change? I remember reading something about people who use their van for even a little bit of personal use will be hammered. (Taking the kids to school etc)

As from 2007 IIRC there'll be something like tax and NI on 3,000 + more if fuel is provided. Quite a rip-off. The only exemption is that you'll be able to use the van for free if you only use it to travel to and from work in addition to work mileage.

In practice it is probably better to own the vehicle yourself and to "give" yourself 40p per mile for business mileage plus and extra 5p per mile if you carry an additional employee.

It's an option to consider.

In practice it's best to look at all the different options (buy, lease, mileage) and do the calculation.

There's always estimates invloved but it's the only way to be reasonably sure.

That's right, rhe code deduction for a new van will be 3000 instead of

It was also just tax and NI on 350 if the van was a few years old, but that includes fuel. I didn't think the "new" 3000 included fuel allowance which I thought was another 3,500. Is that correct?

Another £500 over the basic £3,000.

Many thanks - not as bad as I thought. So tax and NI on 3,500. Shame it's a tatty old van though!

Why don't you buy the van from the company and claim mileage?

Because I don't do enough business mileage to pay anything like enough to pay for running expenses. This way it will cost me 1,155 which won't even cover private fuel costs. It is something I keep looking at but don't need to make any decisions until next year.

With the change in the tax rules, is it worth buying a van if you'd rather have a car?

BTW, I think the tax comparison you are making is not quite right. Say the van costs 4000 a year to run, and your mileage if you owned it privately would come to 1000 a year.

If you own the car privately then the company pays you mileage of 1k free of tax (and on which the company gets tax relief), plus a dividend of 3k to cover the rest of the running costs. The dividend requires 3.7k of pre-tax profits within the company to pay it, and the 3k is tax-free and NI-free in your hands - assuming you only pay basic rate tax. So, total cost to the company for the van is 4.7k out of pre-tax profits.

If the company owns the van then it will have to pay the 4k a year running costs. It also needs to pay you a net dividend of 1,155 to cover your tax bill - that will cost the company 1,450 out of it's pre-tax profits. So total cost to the company is 5.45k out of pre-tax profits.

Obviously, you should put your own figures into this example and follow it through.

Somebody will be along shortly to correct me if I have got it wrong, hopefully.

I hear what you say. I doubt I'd do 2,500 miles a year for the company though.

It probably costs nearer 2,500 per year - I doubt there's much depreciation now!

It's a shame I can't just pay tax on the "actual" cost. There are other reasons why it's best to limit income but appreciate your post and it has got me thinking. I need to reassess before next April what I do.

Many thanks.

So isn't it best for you to own the van, pay no tax on it and get refunded 40p a mile for any useage the company makes?

I doubt I do more than 1,000 miles a year on company business. I still have to pay tax on the income I receive to run it.

I accept that on the face of it, it may not make economic sense but at this moment reluctant to give more details away. Nevertheless it is something I need to look at.

On your mileage/cost figures, I think it works out as follows:

You own it: You get GBP400 mileage plus a net dividend of GBP2100. Total cost to company is around 3k

Company owns it: Running cost is GBP2500 plus a dividend to pay your personal tax bill (costs GBP1450, as before). So total cost to company is