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How I Bought a Brand New Tesla Half Price

2020-10-18 · Long video (solo, talking head or whiteboard) · Ali · recording, 6:20 · watch on YouTube

Topic: Money and investing · mode: Explanation and tutorial · tags: His own numbers, Family, His medical past

Ali explains why his new £50,000 Tesla Model 3 was a reasonable financial decision: bought through his business it costs £40,500 after corporation tax, with no benefit-in-kind tax on electric cars, while the same £50,000 taken out as cash would shrink to about £24,000, so he got it for less than half price.

What is said

The parts of the video and what is said in each (★ — how much it matters to the video).

00:00:00 — Why the Tesla was not just a flex; ordering it and its price

  • ★★★ Ali has bought a brand new Tesla Model 3 and sets out, for viewers and above all his mum, why he thinks it was a pretty reasonable financial decision and not just a massive flex. — 00:00:00 · Ali Abdaal's mother
  • ★★ Ali bought the Tesla Model 3 in July 2020, ordering it online, which he found a very nice experience. — 00:00:00
  • ★★ The Tesla Model 3 Standard edition has a base price of £40,490 and the Long Range £46,990, Ali says; the white premium interior and the blue exterior cost £1,000 each. — 00:00:00

00:00:29 — The £50,000 total and the corporation-tax saving of a business expense

  • ★★ With the two £1,000 options Ali's Long Range Tesla came to £48,990, and with about £1,000 of insurance to a total of around £50,000. — 00:00:29
  • ★★ Writing off a business expense, Ali explains, means that something bought exclusively for business use is paid by the business, does not count as profit, and so bears no corporation tax. — 00:00:58
  • ★★ UK corporation tax is 19% at the moment, Ali says. — 00:00:58 · United Kingdom
  • ★★ Because the Tesla Model 3 counts as a business expense, Ali's business pays £9,500 less corporation tax, so the £50,000 car costs it only £40,500. — 00:01:36

00:02:05 — The wholly-and-exclusively rule and benefit in kind, which electric cars are exempt from

  • ★★ To be written off as a business expense, Ali says, a purchase must be used wholly and exclusively for the business, with any personal use insignificant or incidental. — 00:02:05
  • ★★ A camera is easy for a YouTuber to justify as a business expense, Ali says, but a car would be much harder for him, since his business does not require him to travel much. — 00:02:05
  • ★★ In the UK, Ali explains, personal use of something a business bought is taxed as benefit in kind, as if the business were paying you its value. — 00:02:05 · United Kingdom
  • ★★ For a normal car, Ali says, the yearly benefit-in-kind tax on personal use often makes buying it as a business expense not worth it. — 00:02:34
  • ★★★ The UK budget of April 2020 made fully electric cars exempt from benefit-in-kind tax, Ali says: the rate for his Tesla is 0%, so his business can buy it and he can use it personally as much as he wants. — 00:02:34 · United Kingdom
  • ★★ Ali says electric cars were exempted because over half of the cars bought in the UK are bought by businesses, so the tax incentive should make more UK cars electric, which helps the environment. — 00:03:04 · United Kingdom
  • ★★ Dividends are usually the best way for a business owner to take money out of a business, Ali says, but they are taxed too. — 00:03:04

00:03:33 — The alternative: taking £50,000 out through dividends, dividend tax and student-loan repayments

  • ★★ In England, Ali says, a higher-rate taxpayer, earning over £37,500 a year as he does, pays 32.5% dividend tax: £10,000 of dividends leaves £6,750 after £3,250 tax. — 00:03:33
  • ★★ Taking the £50,000 out as cash instead, Ali calculates, corporation tax cuts it to £40,500, and dividend tax of £13,162 paid to HM Revenue and Customs leaves £27,337.50. — 00:04:02
  • ★★ After six years at university studying medicine, Ali still has a student loan of about £60,000 to repay. — 00:04:31
  • ★★ UK student loans are repaid at 9% of everything earned above a threshold of around £20,000, Ali says. — 00:04:31 · United Kingdom

00:05:00 — The two scenarios compared; why having your own business is powerful

  • ★★★ Buying the £50,000 Tesla Model 3 costs Ali's business £40,500, while £50,000 taken out as cash shrinks to about £24,000 after corporation tax, dividend tax and student-loan repayments, so he gets the car for less than half price. — 00:05:00

    “i'm getting this 50 000 car for around 24 000 which is less than half price”

  • ★★ Ali would be more than happy to pay £24,000 for a brand new Tesla Model 3. — 00:05:30

  • ★★★ Business expenses are one reason having your own business is so powerful, Ali says: a solopreneur, creator or internet entrepreneur buys mostly tech for the business, so a camera, MacBook or widescreen monitor comes at half price or less. — 00:05:30 · MacBook

00:05:59 — Pointer to his video on the three levels of making money online, sign-off

Threads in this video

Where the stories that moved here went next

Mentioned

Central: business expenses · Tesla Model 3

Also: Ali Abdaal's mother · benefit in kind · England · HM Revenue and Customs · MacBook · three levels of making money online · United Kingdom

Also centred on Tesla Model 3: Collecting My Tesla Model 3 - Day In The Life · 1400 MILE Road Trip in the Tesla Model 3

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