It is possible for a business to own a car purchased through a UK-based limited company. It is worth considering whether this is really your best option, or whether there are more suitable alternatives.
Can you buy a car through a UK limited company?
Yes, however, there are a few variables that you will need to consider such as what type of vehicle you are purchasing, what the vehicle will be used for and the CO2 emissions.
Benefits in kind
One of the first things to consider before deciding whether to buy a car through your limited company is what that car will be used for. If you are using the vehicle for any form of private use – including the commute to and from your place of work – your company will need to pay a tax called ‘benefit in kind’ (BIK). This is based on the value of the vehicle when it was new. The company will also need to pay Class 1A National Insurance.
VAT can only be claimed back on a car used exclusively for work. Similarly, you may be taxed on fuel in addition to BIK.
Additionally, owning a car through a limited company means paying its day-to-day running costs through its company accounts, which may negatively impact profits.
Capital Allowances
If you choose to buy a car through your UK limited company, you will be able to claim tax relief through capital allowances. The amount you can claim is dependent on the car’s CO2 emissions. The more CO2 released, the higher the tax you will need to pay.
Financing a car through your limited company
Car finance is a sensible option if you are looking to spread the cost of a car when buying through your limited company. Calculate your car finance online or contact our team to talk more about buying a car through your limited company.