Company Car - Own Limited Company

[RichyRich]

Anyone here who has their own Limited company can explain to me the term "Write down" and what it means from a accounting perspective?   I've heard people say the car can be written down 18% in the first year.  Not really sure what this means.   Apologies I know this is an accounting question but to thought there must be people on here who are running a Lexis IS300H as a company car 

[Dippo]

Google is your friend.

 

https://www.gov.uk/capital-allowances/business-cars

[RichyRich]

26 minutes ago, Dippo said:

Google is your friend.

 

https://www.gov.uk/capital-allowances/business-cars

Thanks but I think I need a dumb down interpretation as HMRC talk is also a little unclear (to me at least)   

What I want to know is what is the impact to my business having a car as a asset and how over the next few years it effects my profit I guess.  I understand I think that the car will depreciate year on year but I am not clear if this is a good or bad thing for me as a director of my own limited company.   

[Linas.P]

It is quite funny how IS300h is conveniently reporting 109g/km, whilst back in 2013 the limit for top rate (18%) was 110g/km. Fortunately, it still falls into "main rate pool" of 18%, so Lexus didn't need to invent IS300h which reports 74g/km...

[RichyRich]

3 minutes ago, Linas.P said:

It is quite funny how IS300h is conveniently reporting 109g/km, whilst back in 2013 the limit for top rate (18%) was 110g/km. Fortunately, it still falls into "main rate pool" of 18%, so Lexus didn't need to invent IS300h which reports 74g/km...

Does that mean 18% of of the vehicle list price can be claimed back?

[rayaans]

3 hours ago, RichyRich said:

Does that mean 18% of of the vehicle list price can be claimed back?

Not really.

Lets say an IS300H was £30k when bought with 80% business use and 20% personal use. Due to its emissions it goes into the 18% main rate pool.

0.18 x 30k = £5400

Take out personal use so 0.8 x 5400 = 4320

Then you take out £5400 from the cars value = 24600 (this figure is used next calendar year as the value of the car)

With the £4320, it'll get taken out of your income, so essentially, you dont pay tax on the £4320

I believe, after the value of the car dips below 15k the accountant keeps nagging me to change my car as he cant claim anything back.

Ive been doing this for years, thought it was common knowledge! Anyhow, the new Volvo XC90 is seriously enticing me, especially the T8 hybrid, I can claim 100% back in the first year, then just sell it in the second year and actually make a profit! lol

 

Oh and should also mention that you can write down 18% each year for as long as you own the car considering its over a certain value, I think that value is £15k but will probably have to check.

 

[RichyRich]

5 hours ago, rayaans said:

Not really.

Lets say an IS300H was £30k when bought with 80% business use and 20% personal use. Due to its emissions it goes into the 18% main rate pool.

0.18 x 30k = £5400

Take out personal use so 0.8 x 5400 = 4320

Then you take out £5400 from the cars value = 24600 (this figure is used next calendar year as the value of the car)

With the £4320, it'll get taken out of your income, so essentially, you dont pay tax on the £4320

I believe, after the value of the car dips below 15k the accountant keeps nagging me to change my car as he cant claim anything back.

Ive been doing this for years, thought it was common knowledge! Anyhow, the new Volvo XC90 is seriously enticing me, especially the T8 hybrid, I can claim 100% back in the first year, then just sell it in the second year and actually make a profit! lol

 

Oh and should also mention that you can write down 18% each year for as long as you own the car considering its over a certain value, I think that value is £15k but will probably have to check.

 

Perhaps it is common knowledge but not to those new to it I guess...  The 100% you mention in thr first year is the list price of the car right?   Is that 20% off the list price as you save offset the full price of the car against your profit? 

I am a little unclear,  no alot unclear how the car will effect my profit I guess.   I am doing this through a PCP and have in my mind what my options are at the end of the contract but not really how my business will see it. 

[rayaans]

10 hours ago, RichyRich said:

Perhaps it is common knowledge but not to those new to it I guess...  The 100% you mention in thr first year is the list price of the car right?   Is that 20% off the list price as you save offset the full price of the car against your profit? 

I am a little unclear,  no alot unclear how the car will effect my profit I guess.   I am doing this through a PCP and have in my mind what my options are at the end of the contract but not really how my business will see it. 

I dont think you can do this if you do PCP, only if bought outright I believe as the car is not owned by you/your company until you pay the whole sum off. However, Im sure you can put PCP payments in your expenses instead but its best to speak to an accountant really.

Essentially, yes, whatever the Writing down allowances is (with personal use accounted for) is taken off your profit and therefore you dont pay tax on that. So yes, 20% off list price. for xxx number of years before the car dips below a certain value.

With the 100% allowance, you can only claim in the first year. With the 18% pool you keep claiming until the car falls below a certain value.

 

[wh05apk]

I'm not sure if there is a minimum  amount, probably just a level where it doesn't make financial sense., I have just dealt with a client, whose accounts show a car value of ..............£2,300, why she doesn't just claim 45p per mile for her own car I don't know.

[RichyRich]

24 minutes ago, wh05apk said:

I'm not sure if there is a minimum  amount, probably just a level where it doesn't make financial sense., I have just dealt with a client, whose accounts show a car value of ..............£2,300, why she doesn't just claim 45p per mile for her own car I don't know.

I guess that would be the point where it's best to change the car if the value of the car makes no sense offsetting against your profit.  My plan is to keep changing in to a new car every 3 years but this is up for debate closer to the time.  I didn't want a huge outlay from my business on a New car and nor did it seem worthwhile buying a used IS as the BIK is calculated on the new price.   Really it comes down to cashflow and with a nearly 0% finance on a new car it made sense (I think it does!!)  

[RichyRich]

1 hour ago, rayaans said:

I dont think you can do this if you do PCP, only if bought outright I believe as the car is not owned by you/your company until you pay the whole sum off. However, Im sure you can put PCP payments in your expenses instead but its best to speak to an accountant really.

Essentially, yes, whatever the Writing down allowances is (with personal use accounted for) is taken off your profit and therefore you dont pay tax on that. So yes, 20% off list price. for xxx number of years before the car dips below a certain value.

With the 100% allowance, you can only claim in the first year. With the 18% pool you keep claiming until the car falls below a certain value.

 

The way I see this is simply I am expensing the cost of the car payments each month.  I did put down a sizable deposit around 10k so not sure how that has been calculated against my profit if at all!!    I am in the process of changing accountants as my current one just doesn't get it.   

[rayaans]

1 hour ago, RichyRich said:

The way I see this is simply I am expensing the cost of the car payments each month.  I did put down a sizable deposit around 10k so not sure how that has been calculated against my profit if at all!!    I am in the process of changing accountants as my current one just doesn't get it.   

I doubt the deposit was put against it. Makes it simple for me because I just buy the car outright so I just hand the accountant the receipt and then it just gets done from there.