Should I lease through my Business or on a Personal Lease?

This is a question we get asked a lot; especially by small business owners who have the option to do either.

There’s no set answer, as everyone’s situation is different, however, there’s a few things you should consider before you go any further.

Personal Leasing

  • Credit – the credit for the vehicle will be taken out in your name.  So think about any impact that may have on other borrowings you have, or are looking to have i.e. are you looking to re-mortgage soon and would this impact it?
  • Insurance – if you use the vehicle for work (not commuting), your insurance premiums will increase
  • Tax – you’re not going to pay company car tax, but you are making the payments out of taxed income.
  • Fuel – you can claim up to 45p per mile for any business miles from HMRC

Business Leasing

  • Tax Liability – company car tax is set to increase year on year for up until 2021.  So picking the car with the right BIK now will avoid nasty surprises as the contract matures.
  • Employers Class 1A National Insurance – don’t forget, your company is also paying this cost, so as with Company Car Tax, getting the right BIK now is important.

With some stringent emissions targets, the governments tactics are fairly evident from the way they’ve set out the taxation policy over the next 5 years; with year on year increases well above the rate of inflation.  The average company car driver will see their tax liability jump by circa 20% over the course of their lease agreement, so it’s never been more crucial to look to the future when picking your car.

Vehicleflex have completed some analysis of the Benefit in Kind (BIK) rates and we can see that an average vehicle will effectively move up 6 BIK bandings, making a significant difference to your liability.  So, you really need to flip things on their head, decide on the tax you’re prepared to pay each year on your car

 

We’ve created a handy tool that shows you how your BIK liability will change over the course of your lease.  If you’d like some advice or a link to the tool, just contact one of the team today and we’d be happy to help.