Q. My company is doing well and I’d like a new car, possibly a BMW series 5. Should the company lease or buy this car, or does it make more sense for me to take a dividend from the company and to buy the car personally?
A. As the car is available to you for personal journeys you will be taxed on the ‘benefit’ of driving that car giving rise each year to a tax bill for yourself and a NI bill for your company at 13.8%.
The company will get a deduction against profits for the cost of leasing the car, but that deduction is limited if the car has CO2 emissions over 160g/km (reducing to 135g/km from April 2013). Likewise the capital allowances are restricted for cars with CO2 emissions over 160g/km. The company can pay for the car’s insurance, servicing and repairs, with no further cost to you, the driver. However, if fuel is provided there is an additional benefit in kind to be taxed on you.
In reality the calculations need to take into account other factors such as the cost of insurance and whether you need to borrow money to buy the car.