If you run your own business and are considering – or have recently gone through – a change of vehicle, you would have probably wondered, can you write off the payments on a leased car for business?
Whether you’re getting a new vehicle for yourself or for one of your employees, be sure to read our go-to guide to discover what tax payments and expenses you can reclaim when leasing a car for business.
Can you deduct the monthly payments for a leased vehicle for business?
Long story short, yes. Gov.uk states that, if you’re self-employed, you can claim for:
- Vehicle insurance
- Vehicle license fee, and most importantly…
- Hire charges
You can also claim for maintenance, repairs and servicing as allowable expenses, but we already take care of that for you for free!
What if I use it for personal use, as well as for my business?
You can only claim 100% of the VAT back if you use the vehicle for business, and business only.
Commuting and personal use limits you to claim 50% of the VAT back.
What tax is involved in providing a leased car as an employee benefit?
If an employee benefits from a company car, the vehicle will be taxed as a Benefit In Kind, unless they are used as a ‘pool car’ by more than one employee within the business, in which case they are not taxed at all.
As an employer, you will be responsible for covering the Class 1A National Insurance on the benefit, while employees will pay the income tax.
Income tax for employee vehicles is payable at the following percentages of the list price. The list price is the figure published by the manufacturer or distributor, essentially what the car would cost if you bought it brand-new.
- 16% for 2019/20
- 13% for 2018/19
- A maximum of 37% (unchanged since April 2016, depending on the vehicle’s emissions).
How do emissions affect lease payment deductions for businesses?
Absolutely. As part of the government’s new greener initiative, the higher the emissions your vehicle produces, the more tax you have to pay.
For vehicles that emit CO2 above 130g/km, 15% of your deductible tax is no longer valid and you have to pay it.
If, on the other hand, your chosen vehicle emits less than that, you can claim Corporation Tax benefits, offsetting them against your current company profits.
Can I claim money back from my mileage on a company car?
You can indeed! As per Go Simple Tax‘s guidance, you can claim 45p per mile for business trips for the first 10,000 miles. After that benchmark, you can claim 25p per mile.
If you are also carrying fellow employees on a business trip, you can claim an additional 5p per passenger.
These mileage rates cover running costs such as fuel and MOTs (we actually take care of MOTs for you as part of our lease offers).
Do I have to pay road tax?
Not with our lease deals you don’t! We include road tax within our monthly cost, as well as vehicle maintenance and servicing!