As a small limited company owner or director, one of the key decisions you need to make is how to manage travel expenses for business purposes. In this blog, we explore the circumstances under which it is more beneficial to claim mileage rate per business mile instead of providing a company car, and also consider the implications of choosing electric cars.
Mileage Rates and Benefit-in-Kind (BiK) Charges
The mileage rate for business miles is currently set at 45p per mile for the first 10,000 miles and 25p per mile for any miles thereafter. It is important to remember that these rates are tax-free, so you can claim them without incurring any additional costs.
The BiK charge for a company car is calculated based on the vehicle’s list price, CO2 emissions, and the employee’s income tax band. High-emission vehicles are subject to higher tax rates, which can substantially increase your business expenses.
Circumstances Where Claiming Mileage is Beneficial
- Low business mileage: If your business travel is limited, claiming a mileage rate per business mile can be more cost-effective than providing a company car. This is because you avoid the costs associated with insurance, maintenance, and fuel, as well as the BiK tax liability.
- Personal vehicle ownership: If you already own a personal vehicle suitable for business use, claiming mileage for business travel can save you money compared to providing a separate company car.
- Flexible work arrangements: If your employees work remotely or have varying travel needs, mileage reimbursement can be a more efficient and cost-effective solution.
Circumstances Where a Company Car is Beneficial
- High business mileage: If your business requires frequent and long-distance travel, providing a company car can be more cost-effective in the long run, despite the associated BiK tax liability.
- Employee retention and satisfaction: Offering a company car as a perk can help attract and retain top talent, improving employee satisfaction and overall company performance.
- Brand image: Providing a company car, especially an electric vehicle, can enhance your company’s brand image and demonstrate your commitment to environmental sustainability.
The Electric Car Advantage
If you decide that providing a company car is the best option for your business, electric vehicles (EVs) offer a more cost-effective solution. Thanks to the UK government’s commitment to reducing carbon emissions, electric cars have significantly lower BiK rates compared to their petrol or diesel counterparts. This means that by choosing an electric company car, you can save on tax while also contributing to a more sustainable future.
Making the Right Decision for Your Business
Ultimately, the choice between claiming mileage and providing a company car will depend on your specific business needs and circumstances. By carefully evaluating the factors mentioned above, you can make a well-informed decision that will benefit your business in the long run.
If you need expert guidance and support, our team at Southside Accountants Wimbledon is here to help. Don’t hesitate to contact us at support@southsideaccountants.co.uk for personalised advice tailored to your business’s unique needs.