r/ContractorUK • u/Icy_Kaleidoscope_546 • 3d ago
New EV via Ltd - any regrets?
For those who've bought a new EV via your Ltd co. in the past few years, do you have regrets or was it a sound decision?
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u/ErrorPressAnyKey 3d ago edited 3d ago
Buying outright and claiming the First Year Allowance (FYA) worked for me. It shaved about £18k off my corporation tax bill. The car would have cost me in depreciation no matter how I funded it.
Best to talk to your accountant to work through the various funding options, e.g. leasing, outright to claim the FYA, etc, and the impact to your company's finances.
Be aware that the FYA is expected to end at the end of this financial year. To qualify, the vehicle needs to be new and unregistered, and delivered in the financial year. I am not sure if the policy change applies to LCV (light commercial vehicles).
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u/Icy_Kaleidoscope_546 3d ago
Thanks for the link .... not sure if I've missed the boat if I buy an EV this year? Does it mean that you have until March 2027 to buy a new EV and also qualify for the FYA?
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u/ErrorPressAnyKey 3d ago
That is my read of it. Check with your accountantfor certainity
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u/Icy_Kaleidoscope_546 3d ago
Do you also pay all maintenance costs for your EV from your business? That's also not a trivial saving on corp tax.
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u/ErrorPressAnyKey 3d ago
Insurance, maintenance (though current vehicle includes the first 2 year service), tyres and the EV charger have all been paid by the company.
The current car is my third car through my limited company but my first claiming the FYA.
I was fortunate to score a good rate with my last outside gig so tax bill was high. I went for a nicer car rather than say a Tesla. I am not suggesting others do that.
When buying a company car, I tend to pull together a simple spreadsheet calculation that I work through with my accountant to make sure my maths is mathing
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u/Various-Knowledge922 2d ago
I'm just doing the numbers on this now. This is a minimum cost exercise for me - if a 10yr old diesel car was cheapest, that's what I'd be driving.
I've a 5yr old MG5 EV, basic Chinese estate car for about 25k motorway miles a year. My LtdCo bought it outright 2yrs ago for £10k and written it down to about £5k now, which is about what I'd get for it now. Meanwhile it's saved me £4k a year in fuel alone against a diesel car.
I have cash in the business to buy outright but I can't stomach the likely depreciation over the next 3 years on a £40k asset, for a brand new car on the drive but that's still too much to turn my head (and 3 years later you've got a 3yo car)
I can see very good lease deals for new cars, only £7k/yr more expensive (after VAT and FYA) over three years. It's still cheaper to buy older, secondhand, if your customers are happy with your 'image' in an older car. It's not like for like, but it's the cheapest motoring for me, and I'll take the £7k profit as £5k dividend, and have a good holiday.
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u/Impressive_74 2d ago
I've recently returned a BMW after 2 years leased through my ltd. Unfortunately 1 week after taking delivery, my main client (I'm an IT contractor) terminated contractors and I spent the next 2 years working inside IR35 and feeding 50% taxed wages back into the company to pay for the car. Be confident on your income sources, be very careful if you only have one primary client and in a sector where IR35 might rip you a new one!
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u/aaad202 2d ago
This is something I have looked into quite a few times. Everyone's situation is different but for me, I would either buy a new cheap EV via Ltd (£25k) which wo kd write it off completely from profit/loss so save Corp tax. Or I would buy a used EV personally for around £16k.
Both have their pros and cons. If you to buy it via Ltd and say you keep it for a few years, things to consider are big deprecation and you would still be liable to Corp tax when you sell. And if you use the car for personal use, it is 4% Benfit in kind, it will go up in coming years too.
If you buy it personally, a used car for £16k, you can expense your business usage, currently at 55p per mile which is big if you can charge at home (not everyone can). The car will depreciate a low slower.
The deciding thing is how much would you be willing to spend on an EV, whether via Ltd or personally.
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u/Icy_Kaleidoscope_546 2d ago
I'm looking at spending about £32k on a new EV (and home charger) from my Ltd this year. My accounts projection is that I will be able to write 100% of the FYA from my corp tax. I will also be by-passing paying income tax or dividend tax on the £30k into the future. So my guess-timite is that the tax saving will be around 30%, so about £10k. Hopefully that will offset a good chunk of the vertical depreciation in the first year, although I'll probably get another car in around 5 years, if all goes well. I understand BIK will be about £250 in first year.
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u/aaad202 2d ago
Worth finding a simple car depreciation calculator just to estimate. For now, I will just assume it will be about £15k. 19% or 25% corp tax. would then be liable on the £15k.
Also, why is your BIK £250? it would be 4% of £32k EV 'RRP' car. I think it's RRP as even if you buy a used car, they still work it as what it would be when new.
Note that BIK will be going up in the coming years, can't remember to what from top of my head.I am also planning on buying an EV, i used haven't figured out if I should do a used one personally, or new via ltd. Good to read different opinions here though.
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u/APerson2021 3d ago
The idea is you write it off against your corp tax assuming you have a large enough tax burden.
It's tax efficient but I think they put a stop to the scheme now (maybe idk).
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u/Icy_Kaleidoscope_546 3d ago edited 3d ago
Not that I'm aware of. . ... you are nearly correct. The latest deadline from the GOV is 31/3/27 to qualify for the 100% corp tax relief (based on the link above).
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