Accounting

Getting a new car?

Pretty sure I’ve posted on the buy or lease options before but as I’m getting more than my fair share of enquiries on it, here’s a little broadcast to give those concerned a leg-up. Please note that the following is only relevant to self employed professionals who are looking to acquire cars that will exceed CO2 emissions of 130g/km.

At this moment in time (25 October 2014):

If buying outright, the car is treated as a fixed asset and therefore entitled to annual allowances on the full cost – this is about 8% subject to private use. If a general loan is taken out, the interest payments are also allowed against tax. When the car is sold, what is known as a balancing allowance is allowed against tax. Obviously, if a profit is made (normally unlikely with cars), a balancing charge is added to profits.

If leasing, and I’m concentrating on operational leases here, payments are made monthly over a pre-determined term and the car is returned to the leasing company at the end of the term. 85% of lease payments are allowed annually against tax subject to private use.

For HP, the tax situation is similar to buying outright in that the car is treated as an asset and therefore entitled to annual allowances on the full cost. Additionally, the HP interest is also allowed against tax.

Obviously, the above only deals with tax positions. There are, arguably, other important issues to consider such as attitude to 100% ownership of a car, the resale values (if low, leasehold is better), cost of car compared to payment over the term of the lease, what the lease includes and restricts e.g. maintenance costs and mileage restrictions.

Please be aware that a dealership might provide variations of the above just to carve out a unique selling point so it is important to pay attention to the details and make sure the signature goes on the right contract.

[Finally, I accept no risk for any loss suffered as a result of direct or indirect reliance on the above article. Before entering into a contract, ensure you speak to your accountant and provide figures so that near-accurate comparisons can be made. If your accountant is unable to help, it might be time to make a change. The contact page is just a click away and our initial chat is free.]

Advertisements

About Phoenix

Accountant and Home Educator

Discussion

No comments yet.

Get in touch

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Follow PHOENIX DEBOLA ACCOUNTANCY SERVICES on WordPress.com

Enter your email address to receive notifications of new posts by email.

Join 3,137 other followers

POST CATEGORIES

0044 780 370 4496
0044 168 981 8119
%d bloggers like this: