What kind of idiot gets a brand new car?

[Ev0]

Really? if you use a company car as a daily driver and not a pool car then the VAT is not recoverable for a business. As it would not be a pool car, the benefit would have to be declared on an employees P11d and as such the lease benefit would attract income tax based on CO2 emissions. For the individual it is still a pretty good deal if the car has low emissions, however if you are a company director and major shareholder you are taking hits to profit (with a reduction in tax) as well as additional income tax as an employee.

Take the above example @£525 plus VAT @ £92

Cost to company =£7404 per annum

Cost to Profit after tax for company =£5775

Cost to individual based on Tax and CO2
35% of new price = £20000 per year approx

Total = £26k per year

In what world is leasing one of those cars efficient if your company pays for it?

It's his company/self employed with a cotnract hire, I'll find out how it's done but doesn't have to faff with all the company car tax CO stuff as far as I know.

It's literally a case of writing the expense off against his tax bill, but I'm not his accountant so don't know the ins and outs.

So I don't think it's classed as a 'company car', will ask him though...

 

[SpeedFreak]

Would be interesting to hear as I am an accountant and deal with leases daily lol.

 

[Ev0]

I've asked the question and will see what they say, but if it's not legit then he wouldn't be doing it as that's not how he does things

 

[[TW]Fox]

Would be interesting to hear as I am an accountant and deal with leases daily lol.

Not much of an accountant are you!

You don't pay the entire car benefit rate each year, you pay a proportion of it based on your tax band!

So a 40% tax payer would pay about 8k a year in tax not 20k.

And people say experience is everything....

 

[hurfdurf]

And people say experience is everything....

And people tell fibs on the internet!

 

[=VTA=MANFACE]

Nice car, enjoy !

The last time me and the missus bought a new car was back in 2004, we bought a couple of 4x4's - we live on a small holding - we were thinking of buying new again this year, but, I think we'll buy new in a few years time, the cars are running very well.

 

[merlin]

So a 40% tax payer would pay about 8k a year in tax not 20k.

Not so.

If the Benefit in kind is £8,000 then that £8,000 simply errodes your tax code.

If we said for example the usual tax free alllowance was 800L then that's £8,000 a year you can earn tax free. If then the benefit in kind for the company car was £8,000 then your tax code has been zero'd to nil meaning you're going to get taxed right from the first pound you earn rather than from £8001 upwards.

I have a zero tax code as my company car wipes out my tax code (actually it's a fraction under zero so I have a K code), so I pay tax right from the word go. Costs me maybe £250 a month or so. Also you have to bear in mind 40% tax bracket people don't pay 40% on all of their earnings - it's something like 21% up to £35k and 40% over that.

 

[Jonnycoupe]

It's his company/self employed with a cotnract hire, I'll find out how it's done but doesn't have to faff with all the company car tax CO stuff as far as I know.

It's literally a case of writing the expense off against his tax bill, but I'm not his accountant so don't know the ins and outs.

So I don't think it's classed as a 'company car', will ask him though...

It should be if the company (business expenditure) are paying for it and then BIK company car tax applies on it.

In most cases its better to have a personal car that you use for business and use the 40p/25p mile HMRC expense guidlines to reduce company 'profits' and hence corporation tax. Its what I do and how I get 'free' petrol for the first 10k a year.

 

[Vonhelmet]

Not much of an accountant are you!

You don't pay the entire car benefit rate each year, you pay a proportion of it based on your tax band!

So a 40% tax payer would pay about 8k a year in tax not 20k.

And people say experience is everything....

As a tax adviser I'm equally suspicious, but then without seeing the actual numbers or knowing the actual circumstances, it's impossible to tell.

 

[Vonhelmet]

Not so.

If the Benefit in kind is £8,000 then that £8,000 simply errodes your tax code.

If we said for example the usual tax free alllowance was 800L then that's £8,000 a year you can earn tax free. If then the benefit in kind for the company car was £8,000 then your tax code has been zero'd to nil meaning you're going to get taxed right from the first pound you earn rather than from £8001 upwards.

That still means you're paying tax at your marginal rate on the benefit value though, which is what Fox said.

I have a zero tax code as my company car wipes out my tax code (actually it's a fraction under zero so I have a K code), so I pay tax right from the word go. Costs me maybe £250 a month or so. Also you have to bear in mind 40% tax bracket people don't pay 40% on all of their earnings - it's something like 21% up to £35k and 40% over that.

So... you're basically paying tax at the marginal rate on the car benefit, yeah?

 

[Jonnycoupe]

. Also you have to bear in mind 40% tax bracket people don't pay 40% on all of their earnings - it's something like 21% up to £35k and 40% over that.

Thing is that the higher earnings threshold is ~ 37k after your tax free allowance (tax code). So its floats around with the P11d adustment as to where you jump from 20% to 40%.

 

[merlin]

That still means you're paying tax at your marginal rate on the benefit value though, which is what Fox said.

Erm, Fox just said you'd pay £8k a year in tax for the car.

 

[merlin]

Thing is that the higher earnings threshold is ~ 37k after your tax free allowance (tax code). So its floats around with the P11d adustment as to where you jump from 20% to 40%.

Quite.

Point is though a car with a BIK of £7k will take around £250 a month off a 40% earner.

 

[Vonhelmet]

Erm, Fox just said you'd pay £8k a year in tax for the car.

If the benefit is £20k, as speculated, and you're a higher rate taxpayer, which you probably are if your company car benefit is £20k, then... you will pay £8k a year in tax for the car.

 

[merlin]

If the benefit is £20k, as speculated, and you're a higher rate taxpayer, which you probably are if your company car benefit is £20k, then... you will pay £8k a year in tax for the car.

I think he was saying the purchase price of the car was £20k and in his example said 40% of £20k is £8k.

 

[merlin]

A £20k BIK would probably mean you're driving around in a Zonda!

 

[Del Lardo]

To be honest most of my comments in this thread bar the first one (Which you expected from me be honest, you even had a provactive thread title) are general not aimed at you. You seem a reasonably switched on guy which is why you've not gone bonkers and started swearing at everyone who doesnt like your new car.

That said I found your figures intruiging. Based on the best available online lease price the car is costing circa £11k over 3 years. Compared with the Mondeo, this removes all repair costs from the equation and halves your fuel bill.

But you must still pay to service the Megane (Which will cost more, at a Renault dealer, than getting the Mondeo done) and you still need to put tyres on it (Which with those wheels wont be any cheaper than the Mondeo. You still have to insure it, which given your age, will be similar money to the Mondeo, ie hardly anything.

So your real savings are 50% of your fuel cost, 100% of your unschedule repair bills and £200 a year in tax.

With this in mind did the Mondeo REALLY cost around £3500 a year in extra fuel, tax and repairs?

Mind you, on the other hand, the Megane is new and tidy and the Mondeo was almost 10 years old. Despite being a Ghia X I doubt it had significantly more equipment than a new Megane.

Swings and roundabouts I guess. I personally feel a used Golf or something would have been a better choice for you.

None of the comments taken personally

The problem you have with your numbers is that they are totally wrong, I am paying nowhere near £11000 over the three year period. Have a look at http://www.renaultukleasing.co.uk/Cars/NewMeganeCoupe Renault are offering the same car for £199+VAT (though it is only 10k/year).

Then you need to look carefully at the actual running costs of the cars, assuming 3 years/36000 miles the Megane should only need 2 tyres @ ~£80/corner, the Mondeo will need 6 @ £110/corner, similar situation for discs and pads. The Megane will only need servicing twice (I may be able to get away with once) while the Mondeo would have needed four, costs for the services will not be hugely different as there is no MOT to pay for on the Megane. Tax is also a consideration, it's 'only' £235ish on the Mondeo but that's still £20/month vs £0 and it all contributes towards the monthly cost. I didn't factor them into the calculations but there's the likelyhood of the clutch needing replacing, the exhaust needing replacing and the possibility of the suspension needing to be replaced none of which are cheap.

 

[LiE]

OcUK motors, helping restore the UK economy, 1 spec me car thread at a time.

 

[merlin]

OcUK motors, helping restore the UK economy, 1 spec me car thread at a time.

Not read the thread then, huh?

 

[Captain_Slick]

Because the banger would be unreliable and uncomfortable?

I can't think of anything that this car does other than be newer that a second hand BMW wouldn't do better.

Not necessarily.

Maybe he got it because, shock horror, he likes it? Or maybe because it suits his needs at a cost he deems reasonable? The amount of money you could save by buying a second hand BMW that meets YOUR criteria of a good car doesn't matter in the slightest in regards to the OP, hence why I replied that he could have saved all of his money and bought a reliable £500 banger. That's not the point.