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The company car vs own car
With the ever increasing tax cost of using a
company car, many directors of owner managed businesses have decided
to buy the car themselves and recoup the cost through tax free
mileage charged to the company. In certain situations it is possible,
over a period of time, to recover the total motoring cost and
end up with a new car paid for by the company! This largely depends
on the amount of business mileage covered in a tax year.
For example, if you use for business a company
car, costing £17,500, the tax cost to you and the company
over a period of three years ending 5th April 2007 would be £7,000
if you are a 22% taxpayer and £11,537 if you are a 40% taxpayer.
If the car was your own, the costs and savings to you for the
following annual total and business mileages would be:-
| Annual total mileages |
5,000 miles |
20,000 miles |
| Annual business mileages |
2,000 miles |
18,000 miles |
| Net cost with finance |
£12,126 |
£3,163 |
| Net saving with no finance |
£2,638 |
£11,201 |
So you can see if you do a low business mileage it is normally
better for the company to own the car. But significant savings
can be made to pay for your next car with high business mileage
and no finance required for the purchase of the motor car. If
you are in credit with your company to the tune of £17,500,
you can use the company funds to finance your car. This means
that you incur no finance costs.
If you would like to know more about these tax
savings contact David
Cane on 020 8390 6878.
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