can you write off a car lease on taxes
can you write off a car lease on taxes?
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There is a lot of talk these days about going green, carbon footprints etc. As a small business you’d be forgiven for thinking that the tax breaks to encourage “greener” living are just for the likes of ICI and other large industrial companies, but the Revenue have introduced a generous scheme to encourage small business owners to do more for the environment.
The scheme concerns Company cars. Historically providing a company car to an employee has been very expensive from a tax point of view but no longer – at least for certain cars. Those cars which have CO2 emissions of not more than 110g per kilometre driven qualify for 100% allowances within the Company – this means that if the car costs £20,000 you can offset the whole amount against your Company profits in year 1. Previously this would have been spread over at least 4 years can you write off a car lease on taxes
The benefit in kind charge (the tax payable by the employee) is also reduced to 10% of the list price of the car for cars with a CO2 emission rate of 120g/km or less (as of 6 April 2008). This lower rate is increased to 13% for diesel cars due to a 3% diesel supplement. The benefit in kind charge for electric-only cars is calculated at 9% of the list price.
How then does this relate to actual tax savings? Take the example of a Toyota Prius with a list price of £20,000 and a CO2 emission rate of 104g/km. In year one the Company can write off the whole cost of the car against its profits, meaning a tax saving of £20,000 x 20% i.e. £4000.
can you write off a car lease on taxes
The benefit in kind on the employee would be £20,000 x 10% = £2,000. This would cost a Higher Rate tax payer £800 in tax with the Company paying an extra £256 a year in Class 1a National Insurance.can you write off a car lease on taxes
This then is a tax saving in year 1 of £2,944. Remember as well that the Company will pay for all the repairs, tax, business fuel and insurance on the car, reclaiming VAT where applicable and obtaining corporation tax savings on all costs.
So, the tax breaks are good, but are the cars that qualify worth the extra savings? Personal choice of course, but below are the ones that are currently available, and you may want to check out www.green-car-guide.com for more details.
If you have any question about contracting or would like any further advice please call our new client services helpdesk on 028 7122 8822
can you write off a car lease on taxes
Call us now on 028 7122 8822