To buy or Contract Hire (self employed)?

Dr House

Dr House

Dr House

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Joined
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London
Right so I have looked at all sorts of cars for my wife, finally I got it down to 2 cars. BMW 640d GC and a cayenne diesel.

In the end I have more or less decided on the cayenne, I borrowed one for the weekend and quite liked it. It does not feel as special inside as the BMW but I am a big Porsche fan.

So here are the choices
Buy it for cash at £50k, my mortgage rate is around 3% but the is probably not the best place to park £50k
In 4 years it should be worth £35k
Borrowing costs £6k
Raod tax £1k
Tyres £1.5k
Service £750
So total cost just over £24k

I dont really know how this would work with income tax.

Contract hire 47 + 6 at 8k per year
Hire cost £588 pcm
Maintenance £47 pcm (includes servicing, tyres, discs pads...)
Total cost £636

Now for the man maths.
Total Cost over the 4 years £33k.

My wife will use the car for around 85% business use and she is a self employed. So I think I can wright off £28k against tax thus saving 11k in income tax.

So that brings the true cost down to about £22k over the 4 years or £5.5k per year which makes renting it sound like a good idea.

Any thoughts on this? I am a little on lost what to do.
 
I'm looking at this at the moment and you'll just get hammered for company car tax. I'm looking at a 'van' (amarok or hilux) as long as you don't use it privately there's no company car tax or if you do then the max is £3k and you can write the purchase cost off and claim the vat back.
 
Dr House said:
My wife will use the car for around 85% business use and she is a self employed. So I think I can wright off £28k against tax thus saving 11k in income tax.
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What do you mean "write it off" - if she is self employed you can claim the mileage for business against your tax, not the cost of the monthly lease payments etc

Is she self employed or employed thru her own business?
 
Sorry, she is self employed but will soon be in a partnership. I am not too hot on uk taxes but my understanding was that CH is classed as Operating Leases so she can claim the cost against tax and there is no company car tax as she is self employed.

But please correct me if I am wrong.
 
If she is self employed then she can claim the business mileage - The amounts to use are - car or van 45 pence a mile for the first 10,000 miles then 25 pence a mile thereafter.

It all depends on how the partnership is structed - but I would guess that she will remain self employed and therefore the mileage claim above plus general "business" expenses of the running of the car can be claim.

Bear in mind it must be wholly and exclusively for business use. An example would be the cost of travelling to town to bank the business takings and do your private shopping at the same time.

If you can separate the expenditure between business and private purposes, the business part is allowable. So, if you use a car separately for business and private purposes, the proportion of the expenses that relates to:

business use is allowable

private use is non-allowable

You normally work out the allowable business and non-allowable private proportions based on the mileage covered for each.
 
booyaka said:
If she is self employed then she can claim the business mileage - The amounts to use are - car or van 45 pence a mile for the first 10,000 miles then 25 pence a mile thereafter..
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For that use of a personal car the contract would have to be paid for by the actual person funding it rather than business and hence there is not the outgoing from the business to count as expenses and reduce corp tax.
 
I think your calculations are some way off. I suggest your wife talks to her accountant. When I was in a similar position my accountant suggested the total cost of business leasing was around twice the cost of taking it on privately, even once you take in to account the fact I could off set the VAT. That was for a M135i.

I think as a general rule of thumb it only really makes sense to go down the business leasing route if the car you're looking at has a very low co2 rating.

Out of interest what's the diesel Cayenne like? Looking at it on paper it seems a little under-powered for a car of it's size.
 
booyaka said:
If she is self employed then she can claim the business mileage - The amounts to use are - car or van 45 pence a mile for the first 10,000 miles then 25 pence a mile thereafter.
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Can you explain this a bit for me please? Are you saying when I'm travelling down the motorway at 70mpg, I can claim £31.50 EVERY HOUR, where does the money get paid to or what is it taken off of please?
 
iAustinMark said:
Can you explain this a bit for me please? Are you saying when I'm travelling down the motorway at 70mpg, I can claim £31.50 EVERY HOUR, where does the money get paid to or what is it taken off of please?
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Forget the self employed bit, it's irrelevant. The company you work for can pay for up to 45p per mile (50p if you have a passenger) tax free for every mile do you for business (up to 10k miles per year).
 
iAustinMark said:
Can you explain this a bit for me please? Are you saying when I'm travelling down the motorway at 70mpg, I can claim £31.50 EVERY HOUR, where does the money get paid to or what is it taken off of please?
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Yep
£31.50 for the first 10k
£17.50 after that.

If Traveling at a constant 70mpg.

But ALL your motoring expenses have to come out of that.

So say you get paid £50k
Your mileage adds up to £20k

Your taxable income is based on the £30k left (minus personal allowance)


One of my drivers knocked nearly £45k off his earnings a few years back
 
mattyg said:
Yep



One of my drivers knocked nearly £45k off his earnings a few years back
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you sure about that???

First 10000 miles @ 45p = £4500
Next 162000 miles @ 25p = £40,500

So he did 172k in a year? Even taking out weekends say 250 days a year driving that's 700 miles a day!
 
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Just something to consider - you and your wife seem to enjoy changing and swapping cars regularly. Take into account any costs you may incur if you decide to change after say 12 months.
 
iAustinMark said:
Can you explain this a bit for me please? Are you saying when I'm travelling down the motorway at 70mpg, I can claim £31.50 EVERY HOUR, where does the money get paid to or what is it taken off of please?
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It's used to offset your potential tax.

I did around 17k business miles last year as self employed, therefore I can claim first 10000 miles @ 45p and next 7000 miles @ 25p

= £5750 this is basically deducted from my gross pay..... say £50,000 so I pay tax on £44,250.
 
booyaka said:
you sure about that???

First 10000 miles @ 45p = £4500
Next 162000 miles @ 25p = £40,500

So he did 172k in a year?
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I should hope I'm sure about that. Thats what I do for a living. All motorway

NW up to Glasgow and down to nr Gloucester 5 nights per week

I've got 34 drivers out 5 nights per week ranging from 300-nearly 500 miles per night
 
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mattyg said:
I should hope I'm sure about that. Thats what I do for a living. All motorway

NW up to Glasgow and down to nr Gloucester 5 nights per week

I've got 34 drivers out 5 nights per week ranging from 300-nearly 500 miles per night
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cheers for the info. I stand corrected my good man.:D
 
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