When it comes to renting a vehicle for your business, there are some advantages you should consider. There are usually better lease deals available for business users. Company vehicle tax is generally cheaper than personal vehicle tax. If you need vans or pickups, there is a flat rate car tax applied. On the other hand, renting a car in person also offers distinct benefits.
You can enjoy a new car every two years, which is definitely a plus. The Vehicle Tax or VED, also known as road tax, is usually already included in the amount. You don’t need to pay the company car tax.
However, when avoiding leasing through the company, you will need to pay the full amount of Value Added Tax (VAT). This means adding 20% to the quoted monthly price. While it is not possible to reduce Corporate Tax, you will save on personal tax as you will not be getting a corporate benefit.
When renting a car in person, it is important to keep an accurate record of all business-related mileage. Your company can refund up to £0.45 per mile for the first 10,000 miles and £0.25 per mile thereafter, without incurring additional tax.
But what is the company car tax anyway? This tax applies when you rent a vehicle through the company and use it for personal purposes, including commuting to work. The tax amount is determined by the following factors: The vehicle’s CO2 emissions. The car’s P11D value, which includes list price, selected options and delivery charges. Your personal tax bracket.
Basically, the higher the CO2 emissions, the higher the company car tax. Therefore, choosing a car with low emissions will help reduce the amount of tax due. In addition, it is possible to reduce the tax amount by using the car only part-time and contributing part of the vehicle costs.
While paying company car tax is unavoidable, rent payments made to the car leasing company are deductible for corporate tax purposes, which can result in savings. However, it is important to note that tax authorities are aware of these practices and in many cases the savings can be minimal or even unfavorable.
If you are interested in renting a van or pickup truck through the company, the tax will be calculated differently. In that case, a flat rate will be applied instead of considering CO2 emissions or the P11D value. The current rate is £3,350 and the amount to be paid varies from 20% to 40% depending on your personal tax bracket. For more information, see the HMRC website.
How do I apply for a VAT refund?
Is it possible to claim VAT refund? Yes, if your business is registered for Value Added Tax (VAT), you can claim a refund (just like you can with home office if you work from home). It will be possible to recover half of the VAT paid. For example, if the monthly cost of your car is £200 plus VAT, you’ll save £40 a month by paying through your limited liability company rather than paying in person. This factor must be taken into account when evaluating the savings you can achieve.