Can someone spell out for me the savings on the Taycan with Salary sacrificeBIK?

[Getoffmyland]

Last year I sold the majority stake in my business and I am still employed by them on a part time/consulting basis.

Really annoyingly, my old firm have said they arent interested in doing a company salary sacrifice for my new Taycan CT :-(

I have the option of moving to self emplyment, setting up my own company and just billing them my salary instead.

The issue then is - extra admin, set up costs etc...

So, assuming a £100k build, can anyone simply set out the savings for a higher (additional) rate tax payer and any for the company (ie VAT reclaim, less NI etc...)..?

I have googled this but it doesnt seem to be set out clearly anywhere, and my own accountant doesnt seem that clear on it!

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[mutanthands]

If you are your own company, you can put the entire price of the car against your tax (lowering your effective tax rate, like any expense), along with VAT if you are VAT registered. If you are paying via a loan, then the same applies, but with each monthly payment.
However, if you only plan on using the car for business (highly unlikely) you can claim 100% VAT, if it's a mixture of business and pleasure then you can claim 50% VAT. In order for the car to qualify, it must be new. One thing to note is that I think you have to pay back the VAT if you sell the car.

You will also need to personally (not via company) pay a benefit in kind rate of 2%, although likely to go up in the coming years.

Another thing to bear in mind is that if you start a new company and then walk into a Porsche dealership, they are unlikely to give you a car loan. The company will need to have been around for a few years with tax returns.etc
If you are paying cash, then this isn't a concern.

I can't comment on the salary sacrifice route.

 

[pauloamore]

With regard to salary sacrifice….

You save income tax. And national insurance savings if your employer shares that with you.

Becuase the monthly lease payments are paid (sacrificed) from gross income.

 

[Midlifecrisis]

You may also save pension contributions on salary sacrifice.
If buying through a company (which you own) the eventual effect is that you avoid paying tax on the depreciation. If the car is the sold the money comes back into the company and is taxable. So you only save on the depreciation. The company can pay running costs (insurance, servicing, tyres, repairs) so they are effectively tax free. And they can pay to install a charge point. But you pay the BIK tax which will be 2% of new value until (I think) 2025.
It might be worth talking it through with an accountant. It will probably save you some money - ironically more if the car depreciates more, which it might not do for a while.
I suspect the tax breaks will drop after 2025 - we will see. You could always sell the car back to yourself if they do.

 

[Fish Fingers]

So just to confirm....? your choices are contracting as either:
1. self employed or
2. employed (Director / shareholder / employee)

Salary sacrifice is applicable to 2.

Im no accountant - but think this is the theory for using salary sacrifice.....

e.g.
If Taycan payments are £1.5k pm and you earn £120k.
So sacrifice salary and earn £102k. Then company pays £18k pa for car.

Then work out any employee NI savings / employer NI savings / income tax savings as salary is lower

Add on bik at 2%. Very low for EVs.

Work out net income. It should have reduced less than the £18k given up due to tax and NI on less earnings.

 

[Jamesca]

On a 100k car, as a higher rate additional tax payter, then if you are using a SS Scheme then figures might look like the below:

Car cost including maintenance, insurance etc - £1,500 p/m
If salary is £155k then gross salary is roughly £12,900 p/m and then you are taxed 45% and also NI
SS scheme will take the cost from gross salary so your salary reduces to £11,400 p/m which reduces your tax and NI contribution (can also affect pension contribution depending on pension) but adds the 2% (from April) BIK tax.

Your net income will go down but instead of by £1,500 it is only around £850 as 45% tax saved, some NI (£30) but you are paying BIK (£62 at 2%) as part of tax.

Employers can pass on both NI savings (up to 13.8%) or keep them as savings, they can also reclaim back some VAT which will make cost to employees cheaper.

 

[Squarecircle]

Each calculation will be different, espeically if you are using your own Limited company as you tend to take dividends rather than salary. Other variables will be:

Hire or lease
VAT registered or not
Maintenance costs
If the employer gives you the Class 1 NIC savings (if employed)
Mileage
Insurance costs
Residual value at the end (if PCP/HP)
Corporation tax rate the company pays (as it will be variable from April)
etc etc

Very broadly and I do this quite a bit, you should save between 40%-50% via salary sacrfice or via your own limited company versus paying for the car personally out of post tax income.

One thing to note though, if you are going to use your own Ltd to contract, you may fall foul of IR35 and the engaging company may be liable and not want you to.

 

[Taycanturbolondon]

If you are your own company, you can put the entire price of the car against your tax (lowering your effective tax rate, like any expense), along with VAT if you are VAT registered. If you are paying via a loan, then the same applies, but with each monthly payment.
However, if you only plan on using the car for business (highly unlikely) you can claim 100% VAT, if it's a mixture of business and pleasure then you can claim 50% VAT. In order for the car to qualify, it must be new. One thing to note is that I think you have to pay back the VAT if you sell the car.

You will also need to personally (not via company) pay a benefit in kind rate of 2%, although likely to go up in the coming years.

Another thing to bear in mind is that if you start a new company and then walk into a Porsche dealership, they are unlikely to give you a car loan. The company will need to have been around for a few years with tax returns.etc
If you are paying cash, then this isn't a concern.

I can't comment on the salary sacrifice route.

just wanted to point out you cannot claim the vat on the car if you purchase it (loan or cash) even the 50%. Only on lease is the vat claim applicable

 

[aatothek]

I was under the impression that the cost of the car can be deductable from company tax liability in some way? I'm not an accountant clearly! Is this correct?

 

[Taycanturbolondon]

I was under the impression that the cost of the car can be deductable from company tax liability in some way? I'm not an accountant clearly! Is this correct?

yes thats correct, leasing or purchasing will then define how you go about accounting for it

 

[aatothek]

yes thats correct, leasing or purchasing will then define how you go about accounting for it

Thanks

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