“Do I Really Need A Company Car?”
One of the first things a budding entrepreneur (well – the ones with interesting objectives) asks us, is “when can I buy myself a car?”.
Apart from quietly shrieking at the speed of rewarding themselves with a car before a sale has been made, we do at this point give our clients a bit of a helping hand with some advice. Sometimes (and surprisingly, less often than the startups!) our clients have an established business first, before they need a car.
It has always been the case – well, certainly for the past decade or two – that HMRC appears to like you having the very best (least efficient) car you can afford, paid for by the business and using it for personal errands. If it was up to the taxman, you’d probably be driving a tank. This is because they receive a royalty, otherwise known as tax on a Benefit in kind (BIK) for you have made that choice.
Emissions are the enemy, and therefore HMRC’s target when it comes to taxing its taxpayers. The higher your emissions, the more you’ll be paying to the taxman. The higher the BIK, the more tax will be due. Not only that, but the company will pay more National Insurance too.
The key to a low tax bill is low emissions.
Rarely do our clients call us and tell us they’d like to buy a bicycle to get to work on. Usually, after they’ve spent the weekend at a Mercedes garage choosing their dream car, we get asked if that was a wise choice – and unless it was an electric one or a brilliantly low emissions model, it probably wasn’t!
As a client of MNE, you are welcome to be part of these conversations – and of course, we will advise you which sort of car will land you with which sort of tax bill. If you’re set on your dream car and it does happen to guzzle petrol, we can, of course, help you prepare for the inevitable tax bill. To find out more about BIKs, company cars or any other perk you’re considering, give us a call and let us help you assess the damage first.