Viability of company cars with increased CO2 emissions

Everyone loves a shiny new car that looks good and performs well. Fuel efficiency and eco-friendliness are also important to millions of drivers and car owners, while striving to get the best possible deal. Here comes the conundrum – is it more tax efficient to buy or lease a car through my company, buy privately or use the mileage allowance?

Emissions are increasingly important and governments across the globe are encouraging people to put measures in place to reduce CO2 emissions from cars.

The first thing to consider when deciding whether to buy, lease or opt for mileage allowance is the different tax considerations for each scenario.

Buying a car through a Limited Company

A limited company can claim tax relief on a car and there are two main options – to buy it outright or to lease it. Increasing numbers of businesses and indeed private individuals are now plumping for the leasing option.

And the good news is that if one leases a car through a limited company, 50% of the VAT on the lease amounts can be reclaimed. Corporation tax relief on the annual lease amount net of VAT can also be claimed.

What is Writing Down Allowance?

People can claim a WDA (Writing Down Allowance) each year if they decide to buy the car. WDAis a percentage based on the cost of the vehicle and its CO2 emissions. New cars and cars with low CO2 emissions tend to provide the best returns.

What about personal tax?

As the owner of a limited company you are both the director and an employee. The business can claim tax relief on the car, but where does one stand when it comes to using it as a private individual? If the car is to be used personally, it will be classed as a benefit in kind, and there will be tax payable on the owner’s self-assessment for using it.

The percentage applied is based once again on the Co2 emissions of the car, ranging from 37% for a car that consumes high amounts of fuel to a rather more attractive 0% for a hybrid or electric car.

What is the mileage allowance?

The big question is whether to lease or buy privately. It is often more tax efficient to buy the car personally and claim the mileage allowance, which is 45p per mile for the first 10,000 miles and 25p thereafter. This is a fully tax deductible expense for the company and has no personal tax implications. Increasing numbers of businesspeople are now switching from a company car to claiming mileage instead as it is more tax efficient.

One important to note in all these is that the BIK value of a car is calculated by multiplying the car’s P11D value (its list price including optional extras, VAT and delivery charges, minus the first year registration fee and annual VED car tax) by the percentage banding the car sits in. In a similar vein, full electric cars will become 0% tax BIK from tax year April 2020/21.

About Genus Leasing 

Genus Leasing is a one-stop-shop for everything car rentals, providing fantastic deals for budget and luxury car rentals, car leasing, and chauffeur services.

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Genus Leasing
Unit A1 Risby Business Park, Newmarket Road,
Risby, Bury St Edmunds, IP28 6RD 
Tel: 01284 810467
Fax: 01284 810386

Media Contact
Company Name: Genus Leasing
Contact Person: Media Relations
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Phone: 01284 810467
Address:Unit A1 Risby Business Park, Newmarket Road Risby
City: Bury St Edmunds, IP28 6RD
Country: United Kingdom