Should you sell your car or house to your business?
It’s important to manage your finances effectively when you’re self-employed, and that includes making the most of any assets you own - particulary when you’re operating as a limited company, as it can reduce your tax bill. So, should you sell your car or house to your business?
Reasons why you might not transfer your car to your business
Claiming business expenses for using your personal vehicle isn’t particularly complicated, but if you’re using a company car for non-business trips it can get much more complicated.
Any personal use means the car would likely to incur a personal ‘Benefit in Kind’ tax charge, along as a Class 1A National Insurance charge, which is calculated from the official list price rather than the sale value. And any fuel used for personal trips will also incur a fuel benefit charge.
As a second-hand car, the value and tax relief amounts aren’t likely to be worth the effort. So, unless you’re going to use it exclusively for work, it’s probably going to incur more admin time or costs than you’ll save.
If you’ve bought the car using finance, then you’ll need to settle any outstanding amount before you’re able to sell it to your business.
Ultimately, it’s often easier to purchase or lease a vehicle specifically for your business if needed, keeping things clearly separated.
Reasons why you might not transfer your house to your business
As with a company car, if you decide to live in a house that is owned by your own business, then you’ll incur a Benefit in Kind (BiK) unless you’re paying full rent at commercial rates.
While BiK is typically charged based on your personal income tax rate band, it can rapidly become complicated. So, it’s essential to seek professional financial advice before considering purchasing a home through your business, especially when you may also be using a directors’ loan as part of the sale agreement.
If an employer, such as your company, also pays any household bills or provides furniture, then these will be additional and separate taxable benefits.
You’ll also find a smaller selection of mortgage providers are willing to lend to a limited company. In addition to higher interest rates, they may also require personal guarantees from the company directors. And if you decide to sell the property in the future, your business will need to pay corporation tax on the profits, before you then take out taxable amounts as salary or dividends.
With something as substantial as home ownership, it really is essential to speak to a qualified financial expert to decide whether it’s worth investigating in your specific circumstances.
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