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Tesla ex demo stock?
- Thread starter kbf1981
- Start date
OK. here's my take on numbers.
All of this assumes there is plenty of cash available when it is needed - if cash is in your pocket and temporarily needed in the company, you can do an interest-free director's loan; if it's in the company and is going to take time to draw out, buy the car on finance (ignoring the finance cost as rates are low).
Car1 - new P100D
Cash price - £130K
P11D price - £134.5K (Add back the 4.5K grant)
Sale price after 4 years - £62.5K
Running costs - Ins £1500/yr, maint £300/yr, tyres £400/yr road tax £310/yr, total approx £2500/yr.
Total net paid out over 4 years to third parties regardless of ownership: (130K - 62.5K) + 2.5K * 4 = £77.5K
Company route
All third party costs paid by company.
BIK at 13% (18/19), 16% (19/20), 2% thereafter so total 33% over 4 yrs on 134.5K = 31.3K.
Company pays Class1A NIC on 31.3K @ 13.8% = £4324
You pay income tax on an extra 31.3K, assume at 40%, so extra £12,533 tax. However, this has to be paid by you rather than the company, so if you draw extra income to allow you to pay the tax bill, that requires a further £12,533 tax/NI to get it there (slightly less if dividend)
Total tax/NI paid over 4 years: £29,390
Personal route
All third party costs paid personally. You therefore need to draw from the company to have a total of £77.5K cash in your hand over the 4 years.
If drawing as income: to get 77.5K in hand you had to pay out a total of £77.5K in tax/NI to get it there.
If drawing as dividend: to get 77.5K in your hand you had to pay out £63.5K in corporation/dividend tax to get it there.
Car2 - used P100D
I've taken figures from post #13 above, without checking exactly what sort of car that was, so some approximations here.
However, I've assumed it to be kept for 4 years to make the results comparable with car 1 above.
Cash price - £98K
P11D price - £134.5K (Assume they were the same price new at that time as they are now - might be wrong)
Sale price after 4 years - £50K (will be 5 years old and out of warranty - this is a wild guess)
Running costs - assume it's CPO so covered by warranty and other costs are the same at £2500/year
Total net paid out over 4 years to third parties regardless of ownership: (98K - 50K) + 2.5K * 4 = £58K
Company route
All third party costs paid by company.
BIK at 13% (18/19), 16% (19/20), 2% thereafter so total 33% over 4 yrs on 134.5K = 31.3K.
Company pays Class1A NIC on 31.3K @ 13.8% = £4324
You pay income tax on an extra 31.3K, assume at 40%, so extra £12,533 tax. However, this has to be paid by you rather than the company, so if you draw extra income to allow you to pay the tax bill, that requires a further £12,533 tax/NI to get it there (slightly less if dividend)
Total tax/NI paid over 4 years: £29,390 (same as the brand new car)
Personal route
All third party costs paid personally. You therefore need to draw from the company to have a total of £58K cash in your hand over the 4 years.
If drawing as income: to get 58K in hand you had to pay out a total of £58K in tax/NI to get it there.
If drawing as dividend: to get 58K in your hand you had to pay out £47.5K in corporation/dividend tax to get it there.
Notes
I have assumed income tax, NIC rates etc remain the same in subsequent years - I've only accounted for the changes in BIK percentages. I have also assumed 40% income tax band (32.5% dividend tax band).
Drawing income: if you start with £x in the company, company pays 13.8% NIC, you pay 40% income tax and then you pay 2% of the original amount in NIC. So starting with £1, 0.138 goes in employer NIC leaving £0.862, of which 40% (£0.3448) goes in tax and 2% (£0.0172) goes in employee NI, leaving £0.4998. So almost exactly, to end up with £1 in your hand you pay £1 in tax/NI. There's no corporation tax on this as wages are allowable against profit.
Drawing dividends: If you start with £x of profit in the company, company pays corporation tax at 19%, then you pay tax at 32.5% so you get in your hand £x * 0.81 * 0.675 = 0.547, with 0.453 going in tax. So to get £1 in hand, you incur .453/.547 of tax = £0.82 tax, so you had to start with £1.82. Hence for any given amount of cash in hand, multiply by 0.82 for the amount of tax paid to get it there.
Corporation tax: I have ignored the 100% FYA etc since this doesn't affect the amount of tax you pay at the end of the day. All of the costs of the car end up being allowable against profits - either directly (in the company car case), or as income (in the personally-owned, income-funded case), except for the case where you are drawing dividends to pay for the car personally in which case you pay corporation tax on the profits used to fund those dividends, as accounted for in my calculations above. However, that's the net-at-end-of-4yrs situation. With the company-owned new car, the profits you used to pay for the car are untaxed in that year, and you have to pay corporation tax on the bit you get back later when you sell the car. With the used car, you have to pay corporation tax on most of the profits you used to pay for the car and only get it back by reducing the amount of corporation tax payable in subsequent years - so leaving a hole in your cash flow in that you are paying tax on money you haven't got any more (because you spent it on the car).
Running costs could vary significantly, particularly the insurance element. For a used car, if it's old enough no road tax; if it's not CPO then need to add for extended warranty or estimate actual costs. Things like non-insurance repairs (dinged rims? parking scrapes?) could push the number up. Tyres expensive here due to assuming 21" because it's a P100D (19" tyres cheaper per tyre and wear slower, but if ultimate performance isn't important, why buy the P100D rather than the S100D?).
BIK numbers above assume purchased at 1st April 2018 - the longer you wait it, the lower the BIK becomes as you are swapping days at 13% for days at 2%.
These numbers assume all mileage is private/commuting. If you do significant business (non-commuting) mileage and own the car privately, you can pay yourself tax-free mileage allowance, reducing the effective amount of tax paid in the private-ownership comparison.
I have largely ignored financing, working on the basis of cash purchase. If owning privately, it doesn't make much difference - if Tesla offer an unrealistically high GFV then they are subsidising the cost of the car, but probably they don't do that to a significant extent if at all. Financing for the company may make a more substantial difference; in particular BCH, but I am not familiar with what Tesla are offering there.
I have ignored VAT. In the company-owned case, you can recover VAT on those aspects of running costs that attract VAT (tyres, maintenance), but it's not a big deal except perhaps if you buy on BCH which I haven't covered.
Disclaimer
I am not an accountant; these figures to the best of my knowledge, but I may have made mistakes. (I have already edited to fix typos and reduce rounding errors)
All of this assumes there is plenty of cash available when it is needed - if cash is in your pocket and temporarily needed in the company, you can do an interest-free director's loan; if it's in the company and is going to take time to draw out, buy the car on finance (ignoring the finance cost as rates are low).
Car1 - new P100D
Cash price - £130K
P11D price - £134.5K (Add back the 4.5K grant)
Sale price after 4 years - £62.5K
Running costs - Ins £1500/yr, maint £300/yr, tyres £400/yr road tax £310/yr, total approx £2500/yr.
Total net paid out over 4 years to third parties regardless of ownership: (130K - 62.5K) + 2.5K * 4 = £77.5K
Company route
All third party costs paid by company.
BIK at 13% (18/19), 16% (19/20), 2% thereafter so total 33% over 4 yrs on 134.5K = 31.3K.
Company pays Class1A NIC on 31.3K @ 13.8% = £4324
You pay income tax on an extra 31.3K, assume at 40%, so extra £12,533 tax. However, this has to be paid by you rather than the company, so if you draw extra income to allow you to pay the tax bill, that requires a further £12,533 tax/NI to get it there (slightly less if dividend)
Total tax/NI paid over 4 years: £29,390
Personal route
All third party costs paid personally. You therefore need to draw from the company to have a total of £77.5K cash in your hand over the 4 years.
If drawing as income: to get 77.5K in hand you had to pay out a total of £77.5K in tax/NI to get it there.
If drawing as dividend: to get 77.5K in your hand you had to pay out £63.5K in corporation/dividend tax to get it there.
Car2 - used P100D
I've taken figures from post #13 above, without checking exactly what sort of car that was, so some approximations here.
However, I've assumed it to be kept for 4 years to make the results comparable with car 1 above.
Cash price - £98K
P11D price - £134.5K (Assume they were the same price new at that time as they are now - might be wrong)
Sale price after 4 years - £50K (will be 5 years old and out of warranty - this is a wild guess)
Running costs - assume it's CPO so covered by warranty and other costs are the same at £2500/year
Total net paid out over 4 years to third parties regardless of ownership: (98K - 50K) + 2.5K * 4 = £58K
Company route
All third party costs paid by company.
BIK at 13% (18/19), 16% (19/20), 2% thereafter so total 33% over 4 yrs on 134.5K = 31.3K.
Company pays Class1A NIC on 31.3K @ 13.8% = £4324
You pay income tax on an extra 31.3K, assume at 40%, so extra £12,533 tax. However, this has to be paid by you rather than the company, so if you draw extra income to allow you to pay the tax bill, that requires a further £12,533 tax/NI to get it there (slightly less if dividend)
Total tax/NI paid over 4 years: £29,390 (same as the brand new car)
Personal route
All third party costs paid personally. You therefore need to draw from the company to have a total of £58K cash in your hand over the 4 years.
If drawing as income: to get 58K in hand you had to pay out a total of £58K in tax/NI to get it there.
If drawing as dividend: to get 58K in your hand you had to pay out £47.5K in corporation/dividend tax to get it there.
Notes
I have assumed income tax, NIC rates etc remain the same in subsequent years - I've only accounted for the changes in BIK percentages. I have also assumed 40% income tax band (32.5% dividend tax band).
Drawing income: if you start with £x in the company, company pays 13.8% NIC, you pay 40% income tax and then you pay 2% of the original amount in NIC. So starting with £1, 0.138 goes in employer NIC leaving £0.862, of which 40% (£0.3448) goes in tax and 2% (£0.0172) goes in employee NI, leaving £0.4998. So almost exactly, to end up with £1 in your hand you pay £1 in tax/NI. There's no corporation tax on this as wages are allowable against profit.
Drawing dividends: If you start with £x of profit in the company, company pays corporation tax at 19%, then you pay tax at 32.5% so you get in your hand £x * 0.81 * 0.675 = 0.547, with 0.453 going in tax. So to get £1 in hand, you incur .453/.547 of tax = £0.82 tax, so you had to start with £1.82. Hence for any given amount of cash in hand, multiply by 0.82 for the amount of tax paid to get it there.
Corporation tax: I have ignored the 100% FYA etc since this doesn't affect the amount of tax you pay at the end of the day. All of the costs of the car end up being allowable against profits - either directly (in the company car case), or as income (in the personally-owned, income-funded case), except for the case where you are drawing dividends to pay for the car personally in which case you pay corporation tax on the profits used to fund those dividends, as accounted for in my calculations above. However, that's the net-at-end-of-4yrs situation. With the company-owned new car, the profits you used to pay for the car are untaxed in that year, and you have to pay corporation tax on the bit you get back later when you sell the car. With the used car, you have to pay corporation tax on most of the profits you used to pay for the car and only get it back by reducing the amount of corporation tax payable in subsequent years - so leaving a hole in your cash flow in that you are paying tax on money you haven't got any more (because you spent it on the car).
Running costs could vary significantly, particularly the insurance element. For a used car, if it's old enough no road tax; if it's not CPO then need to add for extended warranty or estimate actual costs. Things like non-insurance repairs (dinged rims? parking scrapes?) could push the number up. Tyres expensive here due to assuming 21" because it's a P100D (19" tyres cheaper per tyre and wear slower, but if ultimate performance isn't important, why buy the P100D rather than the S100D?).
BIK numbers above assume purchased at 1st April 2018 - the longer you wait it, the lower the BIK becomes as you are swapping days at 13% for days at 2%.
These numbers assume all mileage is private/commuting. If you do significant business (non-commuting) mileage and own the car privately, you can pay yourself tax-free mileage allowance, reducing the effective amount of tax paid in the private-ownership comparison.
I have largely ignored financing, working on the basis of cash purchase. If owning privately, it doesn't make much difference - if Tesla offer an unrealistically high GFV then they are subsidising the cost of the car, but probably they don't do that to a significant extent if at all. Financing for the company may make a more substantial difference; in particular BCH, but I am not familiar with what Tesla are offering there.
I have ignored VAT. In the company-owned case, you can recover VAT on those aspects of running costs that attract VAT (tyres, maintenance), but it's not a big deal except perhaps if you buy on BCH which I haven't covered.
Disclaimer
I am not an accountant; these figures to the best of my knowledge, but I may have made mistakes. (I have already edited to fix typos and reduce rounding errors)
Last edited:
Car3 - very used S85
Cash price - £35K (4yr old)
P11D price - £70K
Sale price after 4 years - £10K (very speculative - will be 8 yrs old, powertrain warranty gone)
Running costs - Ins £500/yr, maint £500/yr, tyres £200/yr road tax £0, total approx £1200/yr.
Total net paid out over 4 years to third parties regardless of ownership: (35K-10K) + 1.2K * 4 = £29.8K
Company route
All third party costs paid by company.
BIK at 13% (18/19), 16% (19/20), 2% thereafter so total 33% over 4 yrs on 70K = 23.1K.
Company pays Class1A NIC on 23.1K @ 13.8% = £3188
You pay income tax on an extra 23.1K, assume at 40%, so extra £9240 tax. However, this has to be paid by you rather than the company, so if you draw extra income to allow you to pay the tax bill, that requires a further £9240 tax/NI to get it there (slightly less if dividend)
Total tax/NI paid over 4 years: £21,668
Personal route
All third party costs paid personally. You therefore need to draw from the company to have a total of £29.8K cash in your hand over the 4 years.
If drawing as income: to get 29.8K in hand you had to pay out a total of £29.8K in tax/NI to get it there.
If drawing as dividend: to get 29.8K in your hand you had to pay out £24.4K in corporation/dividend tax to get it there.
Car4 - used P100D but only for 2 yrs
This is car2 from the previous post, but kept for only 2 years unlike all the other examples kept for 4.
Cash price - £98K
P11D price - £134.5K (Assume they were the same price new at that time as they are now - might be wrong)
Sale price after 2 years - £70K (will be 3 years old)
Running costs - same as the other P100D examples at £2500/year
Total net paid out over 4 years to third parties regardless of ownership: (98K - 70K) + 2.5K * 4 = £38K
Company route
All third party costs paid by company.
BIK at 13% (18/19), 16% (19/20) so total 29% over 2 yrs on 134.5K = 39K.
Company pays Class1A NIC on 39K @ 13.8% = £5382
You pay income tax on an extra 39K, assume at 40%, so extra £15,600 tax. However, this has to be paid by you rather than the company, so if you draw extra income to allow you to pay the tax bill, that requires a further £15,600 tax/NI to get it there (slightly less if dividend)
Total tax/NI paid over 4 years: £36,582 (a brand new car for 2 yrs would be the same)
Personal route
All third party costs paid personally. You therefore need to draw from the company to have a total of £38K cash in your hand over the 2 years.
If drawing as income: to get 38K in hand you had to pay out a total of £38K in tax/NI to get it there.
If drawing as dividend: to get 38K in your hand you had to pay out £31.2K in corporation/dividend tax to get it there.
Cash price - £35K (4yr old)
P11D price - £70K
Sale price after 4 years - £10K (very speculative - will be 8 yrs old, powertrain warranty gone)
Running costs - Ins £500/yr, maint £500/yr, tyres £200/yr road tax £0, total approx £1200/yr.
Total net paid out over 4 years to third parties regardless of ownership: (35K-10K) + 1.2K * 4 = £29.8K
Company route
All third party costs paid by company.
BIK at 13% (18/19), 16% (19/20), 2% thereafter so total 33% over 4 yrs on 70K = 23.1K.
Company pays Class1A NIC on 23.1K @ 13.8% = £3188
You pay income tax on an extra 23.1K, assume at 40%, so extra £9240 tax. However, this has to be paid by you rather than the company, so if you draw extra income to allow you to pay the tax bill, that requires a further £9240 tax/NI to get it there (slightly less if dividend)
Total tax/NI paid over 4 years: £21,668
Personal route
All third party costs paid personally. You therefore need to draw from the company to have a total of £29.8K cash in your hand over the 4 years.
If drawing as income: to get 29.8K in hand you had to pay out a total of £29.8K in tax/NI to get it there.
If drawing as dividend: to get 29.8K in your hand you had to pay out £24.4K in corporation/dividend tax to get it there.
Car4 - used P100D but only for 2 yrs
This is car2 from the previous post, but kept for only 2 years unlike all the other examples kept for 4.
Cash price - £98K
P11D price - £134.5K (Assume they were the same price new at that time as they are now - might be wrong)
Sale price after 2 years - £70K (will be 3 years old)
Running costs - same as the other P100D examples at £2500/year
Total net paid out over 4 years to third parties regardless of ownership: (98K - 70K) + 2.5K * 4 = £38K
Company route
All third party costs paid by company.
BIK at 13% (18/19), 16% (19/20) so total 29% over 2 yrs on 134.5K = 39K.
Company pays Class1A NIC on 39K @ 13.8% = £5382
You pay income tax on an extra 39K, assume at 40%, so extra £15,600 tax. However, this has to be paid by you rather than the company, so if you draw extra income to allow you to pay the tax bill, that requires a further £15,600 tax/NI to get it there (slightly less if dividend)
Total tax/NI paid over 4 years: £36,582 (a brand new car for 2 yrs would be the same)
Personal route
All third party costs paid personally. You therefore need to draw from the company to have a total of £38K cash in your hand over the 2 years.
If drawing as income: to get 38K in hand you had to pay out a total of £38K in tax/NI to get it there.
If drawing as dividend: to get 38K in your hand you had to pay out £31.2K in corporation/dividend tax to get it there.
*** Fixing errors in 1st version *****
All of this assumes there is plenty of cash available when it is needed - if cash is in your pocket and temporarily needed in the company, you can do an interest-free director's loan; if it's in the company and is going to take time to draw out, buy the car on finance (ignoring the finance cost as rates are low).
Car1 - new P100D
Cash price - £130K
P11D price - £134.5K (Add back the 4.5K grant)
Sale price after 4 years - £62.5K
Running costs - Ins £1500/yr, maint £300/yr, tyres £400/yr road tax £310/yr, total approx £2500/yr.
Total net paid out over 4 years to third parties regardless of ownership: (130K - 62.5K) + 2.5K * 4 = £77.5K
Company route
All third party costs paid by company.
BIK at 13% (18/19), 16% (19/20), 2% thereafter so total 33% over 4 yrs on 134.5K = 44.4K.
Company pays Class1A NIC on 44.4K @ 13.8% = £6125
You pay income tax on an extra 44.4K, assume at 40%, so extra £17,754 tax. However, this has to be paid by you rather than the company, so if you draw extra income to allow you to pay the tax bill, that requires a further £17,754 tax/NI to get it there (slightly less if dividend)
Total tax/NI paid over 4 years: £41,633
Personal route
All third party costs paid personally. You therefore need to draw from the company to have a total of £77.5K cash in your hand over the 4 years.
If drawing as income: to get 77.5K in hand you had to pay out a total of £77.5K in tax/NI to get it there.
If drawing as dividend: to get 77.5K in your hand you had to pay out £63.5K in corporation/dividend tax to get it there.
Car2 - used P100D
I've taken figures from post #13 above, without checking exactly what sort of car that was, so some approximations here.
However, I've assumed it to be kept for 4 years to make the results comparable with car 1 above.
Cash price - £98K
P11D price - £134.5K (Assume they were the same price new at that time as they are now - might be wrong)
Sale price after 4 years - £50K (will be 5 years old and out of warranty - this is a wild guess)
Running costs - assume it's CPO so covered by warranty and other costs are the same at £2500/year
Total net paid out over 4 years to third parties regardless of ownership: (98K - 50K) + 2.5K * 4 = £58K
Company route
All third party costs paid by company.
BIK at 13% (18/19), 16% (19/20), 2% thereafter so total 33% over 4 yrs on 134.5K = 44.4K.
Company pays Class1A NIC on 44.4K @ 13.8% = £6125
You pay income tax on an extra 44.4K, assume at 40%, so extra £17,754 tax. However, this has to be paid by you rather than the company, so if you draw extra income to allow you to pay the tax bill, that requires a further £17,754 tax/NI to get it there (slightly less if dividend)
Total tax/NI paid over 4 years: £41,633 (same as the brand new car)
Personal route
All third party costs paid personally. You therefore need to draw from the company to have a total of £58K cash in your hand over the 4 years.
If drawing as income: to get 58K in hand you had to pay out a total of £58K in tax/NI to get it there.
If drawing as dividend: to get 58K in your hand you had to pay out £47.5K in corporation/dividend tax to get it there.
Notes
I have assumed income tax, NIC rates etc remain the same in subsequent years - I've only accounted for the changes in BIK percentages. I have also assumed 40% income tax band (32.5% dividend tax band).
Drawing income: if you start with £x in the company, company pays 13.8% NIC, you pay 40% income tax and then you pay 2% of the original amount in NIC. So starting with £1, 0.138 goes in employer NIC leaving £0.862, of which 40% (£0.3448) goes in tax and 2% (£0.0172) goes in employee NI, leaving £0.4998. So almost exactly, to end up with £1 in your hand you pay £1 in tax/NI. There's no corporation tax on this as wages are allowable against profit.
Drawing dividends: If you start with £x of profit in the company, company pays corporation tax at 19%, then you pay tax at 32.5% so you get in your hand £x * 0.81 * 0.675 = 0.547, with 0.453 going in tax. So to get £1 in hand, you incur .453/.547 of tax = £0.82 tax, so you had to start with £1.82. Hence for any given amount of cash in hand, multiply by 0.82 for the amount of tax paid to get it there.
Corporation tax: I have ignored the 100% FYA etc since this doesn't affect the amount of tax you pay at the end of the day. All of the costs of the car end up being allowable against profits - either directly (in the company car case), or as income (in the personally-owned, income-funded case), except for the case where you are drawing dividends to pay for the car personally in which case you pay corporation tax on the profits used to fund those dividends, as accounted for in my calculations above. However, that's the net-at-end-of-4yrs situation. With the company-owned new car, the profits you used to pay for the car are untaxed in that year, and you have to pay corporation tax on the bit you get back later when you sell the car. With the used car, you have to pay corporation tax on most of the profits you used to pay for the car and only get it back by reducing the amount of corporation tax payable in subsequent years - so leaving a hole in your cash flow in that you are paying tax on money you haven't got any more (because you spent it on the car).
Running costs could vary significantly, particularly the insurance element. For a used car, if it's old enough no road tax; if it's not CPO then need to add for extended warranty or estimate actual costs. Things like non-insurance repairs (dinged rims? parking scrapes?) could push the number up. Tyres expensive here due to assuming 21" because it's a P100D (19" tyres cheaper per tyre and wear slower, but if ultimate performance isn't important, why buy the P100D rather than the S100D?).
BIK numbers above assume purchased at 1st April 2018 - the longer you wait it, the lower the BIK becomes as you are swapping days at 13% for days at 2%.
These numbers assume all mileage is private/commuting. If you do significant business (non-commuting) mileage and own the car privately, you can pay yourself tax-free mileage allowance, reducing the effective amount of tax paid in the private-ownership comparison.
I have largely ignored financing, working on the basis of cash purchase. If owning privately, it doesn't make much difference - if Tesla offer an unrealistically high GFV then they are subsidising the cost of the car, but probably they don't do that to a significant extent if at all. Financing for the company may make a more substantial difference; in particular BCH, but I am not familiar with what Tesla are offering there.
I have ignored VAT. In the company-owned case, you can recover VAT on those aspects of running costs that attract VAT (tyres, maintenance), but it's not a big deal except perhaps if you buy on BCH which I haven't covered.
Disclaimer
I am not an accountant; these figures to the best of my knowledge, but I may have made mistakes. (there were certainly arithmetic errors in the 1st version)
All of this assumes there is plenty of cash available when it is needed - if cash is in your pocket and temporarily needed in the company, you can do an interest-free director's loan; if it's in the company and is going to take time to draw out, buy the car on finance (ignoring the finance cost as rates are low).
Car1 - new P100D
Cash price - £130K
P11D price - £134.5K (Add back the 4.5K grant)
Sale price after 4 years - £62.5K
Running costs - Ins £1500/yr, maint £300/yr, tyres £400/yr road tax £310/yr, total approx £2500/yr.
Total net paid out over 4 years to third parties regardless of ownership: (130K - 62.5K) + 2.5K * 4 = £77.5K
Company route
All third party costs paid by company.
BIK at 13% (18/19), 16% (19/20), 2% thereafter so total 33% over 4 yrs on 134.5K = 44.4K.
Company pays Class1A NIC on 44.4K @ 13.8% = £6125
You pay income tax on an extra 44.4K, assume at 40%, so extra £17,754 tax. However, this has to be paid by you rather than the company, so if you draw extra income to allow you to pay the tax bill, that requires a further £17,754 tax/NI to get it there (slightly less if dividend)
Total tax/NI paid over 4 years: £41,633
Personal route
All third party costs paid personally. You therefore need to draw from the company to have a total of £77.5K cash in your hand over the 4 years.
If drawing as income: to get 77.5K in hand you had to pay out a total of £77.5K in tax/NI to get it there.
If drawing as dividend: to get 77.5K in your hand you had to pay out £63.5K in corporation/dividend tax to get it there.
Car2 - used P100D
I've taken figures from post #13 above, without checking exactly what sort of car that was, so some approximations here.
However, I've assumed it to be kept for 4 years to make the results comparable with car 1 above.
Cash price - £98K
P11D price - £134.5K (Assume they were the same price new at that time as they are now - might be wrong)
Sale price after 4 years - £50K (will be 5 years old and out of warranty - this is a wild guess)
Running costs - assume it's CPO so covered by warranty and other costs are the same at £2500/year
Total net paid out over 4 years to third parties regardless of ownership: (98K - 50K) + 2.5K * 4 = £58K
Company route
All third party costs paid by company.
BIK at 13% (18/19), 16% (19/20), 2% thereafter so total 33% over 4 yrs on 134.5K = 44.4K.
Company pays Class1A NIC on 44.4K @ 13.8% = £6125
You pay income tax on an extra 44.4K, assume at 40%, so extra £17,754 tax. However, this has to be paid by you rather than the company, so if you draw extra income to allow you to pay the tax bill, that requires a further £17,754 tax/NI to get it there (slightly less if dividend)
Total tax/NI paid over 4 years: £41,633 (same as the brand new car)
Personal route
All third party costs paid personally. You therefore need to draw from the company to have a total of £58K cash in your hand over the 4 years.
If drawing as income: to get 58K in hand you had to pay out a total of £58K in tax/NI to get it there.
If drawing as dividend: to get 58K in your hand you had to pay out £47.5K in corporation/dividend tax to get it there.
Notes
I have assumed income tax, NIC rates etc remain the same in subsequent years - I've only accounted for the changes in BIK percentages. I have also assumed 40% income tax band (32.5% dividend tax band).
Drawing income: if you start with £x in the company, company pays 13.8% NIC, you pay 40% income tax and then you pay 2% of the original amount in NIC. So starting with £1, 0.138 goes in employer NIC leaving £0.862, of which 40% (£0.3448) goes in tax and 2% (£0.0172) goes in employee NI, leaving £0.4998. So almost exactly, to end up with £1 in your hand you pay £1 in tax/NI. There's no corporation tax on this as wages are allowable against profit.
Drawing dividends: If you start with £x of profit in the company, company pays corporation tax at 19%, then you pay tax at 32.5% so you get in your hand £x * 0.81 * 0.675 = 0.547, with 0.453 going in tax. So to get £1 in hand, you incur .453/.547 of tax = £0.82 tax, so you had to start with £1.82. Hence for any given amount of cash in hand, multiply by 0.82 for the amount of tax paid to get it there.
Corporation tax: I have ignored the 100% FYA etc since this doesn't affect the amount of tax you pay at the end of the day. All of the costs of the car end up being allowable against profits - either directly (in the company car case), or as income (in the personally-owned, income-funded case), except for the case where you are drawing dividends to pay for the car personally in which case you pay corporation tax on the profits used to fund those dividends, as accounted for in my calculations above. However, that's the net-at-end-of-4yrs situation. With the company-owned new car, the profits you used to pay for the car are untaxed in that year, and you have to pay corporation tax on the bit you get back later when you sell the car. With the used car, you have to pay corporation tax on most of the profits you used to pay for the car and only get it back by reducing the amount of corporation tax payable in subsequent years - so leaving a hole in your cash flow in that you are paying tax on money you haven't got any more (because you spent it on the car).
Running costs could vary significantly, particularly the insurance element. For a used car, if it's old enough no road tax; if it's not CPO then need to add for extended warranty or estimate actual costs. Things like non-insurance repairs (dinged rims? parking scrapes?) could push the number up. Tyres expensive here due to assuming 21" because it's a P100D (19" tyres cheaper per tyre and wear slower, but if ultimate performance isn't important, why buy the P100D rather than the S100D?).
BIK numbers above assume purchased at 1st April 2018 - the longer you wait it, the lower the BIK becomes as you are swapping days at 13% for days at 2%.
These numbers assume all mileage is private/commuting. If you do significant business (non-commuting) mileage and own the car privately, you can pay yourself tax-free mileage allowance, reducing the effective amount of tax paid in the private-ownership comparison.
I have largely ignored financing, working on the basis of cash purchase. If owning privately, it doesn't make much difference - if Tesla offer an unrealistically high GFV then they are subsidising the cost of the car, but probably they don't do that to a significant extent if at all. Financing for the company may make a more substantial difference; in particular BCH, but I am not familiar with what Tesla are offering there.
I have ignored VAT. In the company-owned case, you can recover VAT on those aspects of running costs that attract VAT (tyres, maintenance), but it's not a big deal except perhaps if you buy on BCH which I haven't covered.
Disclaimer
I am not an accountant; these figures to the best of my knowledge, but I may have made mistakes. (there were certainly arithmetic errors in the 1st version)
WannabeOwner
Well-Known Member
@arg huge thank you for that! It's a lot of information to consider. My first reading of it seems to suggest that buying a brand new car via the biz isn't much more expensive than a second hand one personally... but I want to get to an excel sheet tonight and review.
Really appreciate the numbers above. That is very enlightening.
Really appreciate the numbers above. That is very enlightening.
This is why I would only look at the figures provided by a qualified accountant. My wife (who is a chartered tax accountant) is always getting questioned by her clients regarding this kind of calculation and they invariably get it wrong themselves in some way or other. That's not to say your figures are necessarily wrong, but tax is a very complicated subject and not usually very intuitive or logical. With this kind of high value purchase, it's well worth taking professional advice as to the most cost-effective route.
The only reason I took the risk with a Tesla was the high GFV and low APR (1.5% at the time) on Tesla finance. Whether or not Tesla are subsidising the GFV is irrelevant to me. While Tesla might possibly be able to recover the GFV by selling the car on as an approved used car, I very much doubt I would be able to get anything like the same return in a private sale or p/ex
Absolutely. It would be foolish indeed to conduct your tax affairs on the basis of advice from a random bloke on the internet, and aside from any errors there are numerous assumptions in any set of calculations like this that might not match any particular person.
However, we often have people coming here saying they want to buy a Tesla; the cars are expensive, but they've heard that there are tax breaks that can make it more affordable.
This stuff isn't actually that hard to understand, and it's helpful to have an idea of how the different possibilities work so that you can ask the right questions of your accountant. There's often not one correct answer - things like the choice between new and used are a personal matter what value you put on that, or the choice of buying car A today vs car B in a year's time.
So my motivation here is to understand what the typical benefits are, and which factors the calculation is sensitive to. Putting up detailed calculations lets other people have a pot-shot at it, avoiding me (or anybody else) spreading false messages.
The "insurance"/peace-of-mind aspect is certainly a good reason for choosing PCP.
However, my point was that the numbers aren't affected unless Tesla are offering a hidden subsidy through the GFV. If they aren't, then you can choose PCP or cash according to convenience or other factors; if they are then you have a strong incentive to go PCP even if you don't actually want credit.
I don't actually know if they are or not; at the time I bought my car the finance offers were different and the guarantee appeared to have little value. If they are now offering GFVs that are substantially above the expected resale price of the car, then that does reduce the effective cost of the car and makes any route that doesn't let you take the PCP less attractive.
I got PCP on my X75D at 1.5% APR, with a 50% residual after 4 years 40K miles and a flat unlimited 7p/mile excess. We all know depreciation is the biggest cost in a car and especially so with this kind of car. The finance cost was £3655 which I think will be dwarfed by potential depreciation, making it a no-brainer over a cash purchase. I don't normally take credit, but this was an exception. APR has now gone up to 4.9% for a Model X and GFV is still around 50%, so perhaps not so clear cut. But still a major factor to consider when buying a Tesla with a typical 3 or 4 year ownership term in mind. Obviously if buying with the intention of owning the car for much longer than 4 years, then depreciation becomes less of a deciding factor as the car will have a very low residual at the end anyway.
My wife is actually planning to put together a guide to buying a company Tesla, which may be helpful in understanding the various pros and cons and what you can and can't do in regard to company vs private usage. But at the end of the day each case needs individual attention to be sure of choosing the right solution. As you say there are personal decisions to be made.
WannabeOwner
Well-Known Member
That would be a great resource, and very generous of her time
A spreadsheet where the user could enter some parameters indicating their personal data - miles per annum, price of electricity at home, overnight cheap rate, or not, percentage charge at work, and so on would go a long way to helping folk decide this issue. User could then pass to their accountant for "confirmation".
I had my accountant do the sums for me ... for which i got a bill of course. A resource which the accountant could check, rather than calculate from scratch, would be very worthwhile.
That would be a great resource, and very generous of her time
@Peteski maybe she could add your referral code to it......
That would be a great resource, and very generous of her time
A spreadsheet where the user could enter some parameters indicating their personal data - miles per annum, price of electricity at home, overnight cheap rate, or not, percentage charge at work, and so on would go a long way to helping folk decide this issue. User could then pass to their accountant for "confirmation".
I had my accountant do the sums for me ... for which i got a bill of course. A resource which the accountant could check, rather than calculate from scratch, would be very worthwhile.
She got the idea after reading a few previous threads discussing personal vs company purchase. There was so much misinformation and general confusion. She doesn't want much in return, using our referral code would be great of course. But her main motivation was to promote her accountancy business to local Tesla owners as she figured that many are likely to be business owners too. She often gives advice regarding company car purchases for her own clients anyway.
That would be a great resource, and very generous of her time
A spreadsheet where the user could enter some parameters indicating their personal data - miles per annum, price of electricity at home, overnight cheap rate, or not, percentage charge at work, and so on would go a long way to helping folk decide this issue. User could then pass to their accountant for "confirmation".
I had my accountant do the sums for me ... for which i got a bill of course. A resource which the accountant could check, rather than calculate from scratch, would be very worthwhile.
She got the idea after reading a few previous threads discussing personal vs company purchase. There was so much misinformation and general confusion. She doesn't want much in return, using our referral code would be great of course. But her main motivation was to promote her accountancy business to local Tesla owners as she figured that many are likely to be business owners too. She often gives advice regarding company car purchases for her own clients anyway.
Sirricardo
MSM LR 19" Tow....The Unicorn.
Hi Fella
Can you please give me further info on your finance cost of £3655.
Who was it with?
Is this before of after VAT?
What value was financed?
Initial deposit paid.
On a quick search, the best deal i found was roughly 8k/year per 4yrs inc initial.
Thanks
Rich
BTW Look forward to seeing the spreadsheet from the previous poster. Thx in advance
Hi Fella
Can you please give me further info on your finance cost of £3655.
Who was it with?
Is this before of after VAT?
What value was financed?
Initial deposit paid.
On a quick search, the best deal i found was roughly 8k/year per 4yrs inc initial.
Thanks
Rich
BTW Look forward to seeing the spreadsheet from the previous poster. Thx in advance
It was Tesla PCP finance via Blackhorse at 1.5% APR on a net loan of £77K (£11K deposit). All figures including VAT except for the 7 p/mile excess. This was back in September 2017 and since then the finance rate with Tesla has gone up to 4.9% so unfortunately this deal is no longer available.
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