Company Car or own with Allowance [Archive] - MoneySavingExpert.com Forums

sra

19-09-2008, 8:54 PM

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piggeh

19-09-2008, 9:18 PM

well if all you're doing is a 10 mile trip to work and back I'd go with the allowance. It depends on a lot of factors - you should work out how many miles your job requires and from that work out:

How many services this mileage will require for your car
Fuel costs
Approximate repair costs
RFL, MOTs etc
Depreciation
Insurance
Hire costs (if applic)

versus what outgoings you'd have with a company car.

The only outgoings with a company car are the Benefit in kind tax although I believe you'll also have to pay this on your allowance anyway.

hewhoisnotintheknow

19-09-2008, 9:20 PM

well i assume you allready own a car, soooooo in that case i would go with the 490 a month

thats nearly 6grand a year!

piggeh

19-09-2008, 9:30 PM

Well tbh if they own a 20k car and rack up 50k miles per year for example, they'll lose more than 6k a year in depreciation alone. It depends on the individual case.

Companies arent stupid - they've realised how much it costs them. The only way you'd benefit is if they've incentivized the allowance to get rid of the hassle of running a fleet, but it wouldnt run into thousands imo. They still have duty of care obligations which are the major headache really.

sillygoose

20-09-2008, 9:32 AM

£490 before tax or after tax? if its after deductions then I would bite their arm off!

If its a company car you will have a tax liability depending on the vehicles CO2 can be quite a bit and usually the car is new so the terrible initial depreciation has to be borne, usually lowering the quality of the car you can have. If your high business mileage user I would go company as the car is more likely to get damaged, dinged, depreciated or worn out and its not your problem. If your a light to medium miler I would take the money and instead of leasing yourself, look at taking out as low a cost loan as possible, buy a good quality 1 year old car with 2 years warranty remaining. Keep it 2 years. If you consider your £490 + say, £90 per month in tax you would have paid for a company car, + the profit on 15p per mile if you buy a diesel that is plenty to run the car, the loan and tyres, servicing etc. Even better if you got something reliable like a Honda. You could even end up making quite a profit. Well thats what I am doing. Cost me less, better car, (no 1st year depreciation, lease company profits to pay!) and full control of the situation of what I drive, how long I keep it, when the tyres are need replacing etc.

Road_Hog

20-09-2008, 10:10 AM

The advice given by piggeh is good/correct, and in a nutshell, if you're only doing a few miles then take the allowance, if you're doing 50K pa then let them foot the bill and all the hassle.

I would assume that it is £490 before tax and that you will be taxed on that, which you need to factor in. You will have to compare that with what the company car tax would be, e.g.

company car = no cost + company car tax= x
£490 - income tax + running costs = y

Also if you go down the allowance route, you will be able to claim the tax relief on the mileage difference HM Customs/Revenue allowance of 40p mile for the first 10K and 25p per mile there after.

That is the difference in pence multiplied by the miles done and then multiplied by your tax rate as a percentage.

zst1973

20-09-2008, 12:47 PM

Hi

I will average 15/2000 miles PA

I have asked for 2k extra salary if i take the company car.

I have a car already and my partner a van which i colould trade in for a car or would have to sell one.

I just do not understand if the optout is best.

£490 would be less tax which would have to cover the running costs etc of the car insurance tyres service etc.

is the 15p a mile a good rate as not sure.

The compnay car would be about 2k a year cost to me.

i previosly had just the fuel card so i have paid the tax for this for about 4 years. the compney policy has changed and i have to decide in a week which option to go for.

piggeh

20-09-2008, 1:24 PM

Whats the company car on offer? Whats the company policy on what you're allowed to purchase on your allowance? Does it have to be no more than x years old, etc?

The other thing with using an allowance - if you get tied into any contract hire/finance deals you need to think what your position would be if you left your job (through yuor choice or not).

zst1973

20-09-2008, 2:54 PM

Hi

There is a choice of mondeo titanium 2.0d BMW 318d ES and a few volvos/focus etc

There is no age limit it has to have MOT AND BUSINESS insurance

I can buy any car any age.

As i already pay for 1 of my vechs (van) this is why i am struggling to decide as i could use this to pay the finance of on what i trade the van in for and own the car at the end although depreciation is going to still hit me it would not be as bad as selling the van in the current climate.

Wish it was easier than this.

If my employer says yes to 2k if i opt in is that better than the opt out????

dillydilly

27-10-2008, 9:38 PM

I'm just doing a similar calculation but am coming out with a significant profit - surely I'm missing something somewhere, can anyone see where ?

Annual gross allowance on offer 5500
Net allowance after tax and NI 3200

Ins/Tax/Maint/Tyres (1000)
Depreciation (2000)
Cost of finance on £10k cost (500)
Saved tax on company car 2000
Tax reclaim on 20k miles 1400

Net saving per year 3100

can't be right can it ? the saving seems to be made from avoiding the huge car depreciation of a new car and the margin requirement of leasehold companies. Have I double counted/under estimated something ?

AdrianHi

28-10-2008, 3:49 PM

I've done the sums on this before for my 14,000 miles a year.
I run my own Limited company which means if I lease through the company I can claim back 50% of the VAT. This is an advantage you don't have.
Even with this advantage buying the same car privately and claiming 15p per mile is cheaper by £85 a month when I did the sums on a BMW 520d a few months ago. The only advanatage I can think of for leasing is I don't then take the risk of higher than expected depreciation.
If you don't have to get a new car when taking the allowance it becomes a no brainer.
Take the £490 before tax allowance and 15p per mile, keep the car you've got or get something young but not new.
It's cheaper this way and more flexible in that you choose when to change car and if you leave the job you still keep the car.
You don't even need the £2000 salary increase for this route to make sense.

The company car and fuel card option means BIK tax of the car and you are taxed on the fuel card too where HMRC assumes you will be doing a really big mileage and tax you accordingly.

20-01-2009, 12:37 PM

Also if you go down the allowance route, you will be able to claim the tax relief on the mileage difference HM Customs/Revenue allowance of 40p mile for the first 10K and 25p per mile there after.

That is the difference in pence multiplied by the miles done and then multiplied by your tax rate as a percentage.

Can anyone offer any guidance on how to do this?

I've had a car allowance + 12p/mile for work-related trips for the last two years but haven't claimed.

I've been told that there is a two year cut-off for claims. If this is true, that'd be handy.

Can't see any information at http://www.hmrc.gov.uk/mileage/employee-factsheet.htm

Assuming I can claim for two years, should I do it now or wait until after April? (The form currently on the website - http://www.hmrc.gov.uk/forms/p87.pdf - is for the period up to 5th April 2008).

One potential issue is that there is a good chance that I will have left the company by April - would I be better doing the claim whilst I still have access to payroll etc.?

Thanks for any input.

IM

AdrianHi

20-01-2009, 12:43 PM

20-01-2009, 1:04 PM

hewhoisnotintheknow

20-01-2009, 1:39 PM

allowance, if you loose your job you dont have to buy another car when you are hard up

omelette451

20-01-2009, 2:09 PM

AdrianHi

20-01-2009, 2:34 PM

Sorry to go back to basics, but as someone (hopefully) starting a new job soon which will put me in a similar position, can anyone explain simply the benefits/liabilities of having a company car? Primarily in terms of tax, but as I've never had the option before I know nothing at all about it!

BIK - Benefit In Kind tax is calculated by taking a percentage of the original invoice value of the car (the percentage is determined by CO2 emissions bands) and treating that as part of your salary for PAYE purposes (not NI). Sothe amount you pay depends on what rate of tax you pay, value of car, the emissions band it falls into and there is a 3% penatly for diesel. This makes a BMW 318i cheaper than a 318d for company car drivers.
What Car and other car web sites quote the BIK % rate on their details for cars.
The downside of the company car is flexibility. Take a 3 year lease and your stuck with it for 3 years if you find you don't like the car. As said, loose your job and you also loose your car. If you have to have a new car and change it every 3 years or do big miles the company option is probably best. Otherwise taking the allowance and finding yourself something a bit more interesting 6-12 months old with the same budget is probably a better bet.
Very difficult calculation to make.

omelette451

20-01-2009, 2:39 PM

BIK - Benefit In Kind tax is calculated by taking a percentage of the original invoice value of the car (the percentage is determined by CO2 emissions bands) and treating that as part of your salary for PAYE purposes (not NI). Sothe amount you pay depends on what rate of tax you pay, value of car, the emissions band it falls into and there is a 3% penatly for diesel. This makes a BMW 318i cheaper than a 318d for company car drivers.
What Car and other car web sites quote the BIK % rate on their details for cars.
The downside of the company car is flexibility. Take a 3 year lease and your stuck with it for 3 years if you find you don't like the car. As said, loose your job and you also loose your car. If you have to have a new car and change it every 3 years or do big miles the company option is probably best. Otherwise taking the allowance and finding yourself something a bit more interesting 6-12 months old with the same budget is probably a better bet.
Very difficult calculation to make.

Thanks! It's not quite as difficult as I thought after all. But why were people talking about fuel too? Surely you pay for the fuel you use yourself and the company pays for the business stuff? Or is it not that simple?

AdrianHi

20-01-2009, 3:52 PM

Thanks! It's not quite as difficult as I thought after all. But why were people talking about fuel too? Surely you pay for the fuel you use yourself and the company pays for the business stuff? Or is it not that simple?
Depends on your employer.
Some people have the option of taking a fuel card with the car where all fuel is paid for. HMRC tax you a fixed amount on this benefit which seems like a good deal until you realise that you need to be doing 20,000-30,000 personal miles to justify the tax they charge you.
Consequently nearly no one takes fuel cards these days and goes by 12p per mile (HMRC rate) for business miles fuel or whatever the employer will pay. If you take car allowance instead of company car claiming (assume) 12p per mile you can then use P87 form to claim the tax back on the difference between 12p and 40p per mile (first 10K miles) and 20p per mile thereafter.

Getting more complicated now isn't it ;)

Having crunched these numbers before I eventaully concluded that the HMRC are way ahead of you setting tax rates etc. and unless you do a big (10-20K+) business mileage the most economical and flexible route ends up being car allowance + 12p per mile fuel expenses. Being able to buy nearly new and not paying that first depreciation hit helps a lot too.

It does depend greatly on what car allowance the company will give you in place of a company car and what their rules are on fuel expenses etc. though. What I've outlined above seems typical and what my wifes company does.

BillScarab

20-01-2009, 4:06 PM

www.comcar.co.uk is an excellent website for working out what a company car will cost you.

Not sure if it's been mentioned but one of the major benefits of a company car is the peace of mind of having no repair costs should anyhting go wrong.

I'd be quite happy with an allowance but our compnay doesn't offer it. I either have a company car or run my own with no additional pay or allowance. So I take the car.

AdrianHi

20-01-2009, 4:16 PM

Not sure if it's been mentioned but one of the major benefits of a company car is the peace of mind of having no repair costs should anyhting go wrong.

A good strategy when on a car allowance is to buy 6 month old cars, sell them a couple of months before warranty expirey (34 months old) and buy another 6 month old. You always have that no repair cost risk peace of mind due to warranty and it's little different in cost from running a 3 to 7 year old car. Company cash allowance schemes usually put a 5 to 7 (or less) age limit on the car you must have, so you never get to the near zero depreciation age of 7+.

23-01-2009, 1:39 PM

You can claim back 5 or 6 years, it doesn't matter if you change employer but do it ASAP, money better in your bank account and all that.
Contact your local tax office (should be on P60 and may be payslips) and ask them for the previous years P87's.
I've got 5 or 6 P87's for my wife at home waiting for us to have the time to fill them out. :rolleyes:

Right… Forms in the post from the tax man - now another question.

I've heard (famous last words…) that I can claim a rebate against the proportion of the depreciation in my car's value created as a result of the business-related mileage.

i.e. Using the allowance from work, I buy a car for £15,000. I do 10K personal miles and 20K business miles a year.

After a year, my car - with 30K on the clock - is now worth £7,500. If I'd only done my 10K, it would be worth £11,000.

The suggestion is that I could claim against the £3,500 extra loss, resulting from doing my job.

Is there any truth in this - and if so what is the process?

Cheers

IM

AdrianHi

23-01-2009, 2:07 PM

Right… Forms in the post from the tax man - now another question.

I've heard (famous last words…) that I can claim a rebate against the proportion of the depreciation in my car's value created as a result of the business-related mileage.

i.e. Using the allowance from work, I buy a car for £15,000. I do 10K personal miles and 20K business miles a year.

After a year, my car - with 30K on the clock - is now worth £7,500. If I'd only done my 10K, it would be worth £11,000.

The suggestion is that I could claim against the £3,500 extra loss, resulting from doing my job.

Is there any truth in this - and if so what is the process?

Cheers

IM
I know nothing about this rule you are referring too. Anyone else?

I wrote on an earlier post in this thread
"unless you do a big (10-20K+) business mileage the most economical and flexible route ends up being car allowance + 12p per mile fuel expenses. Being able to buy nearly new and not paying that first depreciation hit helps a lot too."

Without doing the sums I would guess that you are one of those better off with a company car. I think it's the only way your going to avoid funding the extra depreciation and maintenance of that large business mileage. 20K business miles a year is a lot :eek: .
Calculating which is best is tough with a lot of variables, how bigger car allowance do you get?
When I did the sums for myself I worked out that I needed to be doing over 11K business miles when considering private or company lease of a new car, and as I own the company that would lease the car I would be getting the benefit of the reduced VAT charge (only pay 50% of full VAT) when going through the company.
I only do about 5K business miles so my car is privately owned.

23-01-2009, 2:24 PM

I know nothing about this rule you are referring too. Anyone else?

I wrote on an earlier post in this thread
"unless you do a big (10-20K+) business mileage the most economical and flexible route ends up being car allowance + 12p per mile fuel expenses. Being able to buy nearly new and not paying that first depreciation hit helps a lot too."

Without doing the sums I would guess that you are one of those better off with a company car. I think it's the only way your going to avoid funding the extra depreciation and maintenance of that large business mileage. 20K business miles a year is a lot :eek: .
Calculating which is best is tough with a lot of variables, how bigger car allowance do you get?
When I did the sums for myself I worked out that I needed to be doing over 11K business miles when considering private or company lease of a new car, and as I own the company that would lease the car I would be getting the benefit of the reduced VAT charge (only pay 50% of full VAT) when going through the company.
I only do about 5K business miles so my car is privately owned.

Those numbers were made up. Reality is more like 25K personal*, 12K business

*The folly of a daily Manchester-Leeds commute.

Allowance was the only option for me - I don't think there are any 'company cars' in the old-school sense at my work.

Could have not had £400/month but claimed 'casual' mileage rate of 38p/mile (23p after 10,000 miles).

In retrospect, it may have been wise to not take the allowance - certainly the 12p/mile I get does not even cover the diesel in the tank, let alone any running costs.

AdrianHi

23-01-2009, 2:57 PM

Those numbers were made up. Reality is more like 25K personal*, 12K business

*The folly of a daily Manchester-Leeds commute.

Allowance was the only option for me - I don't think there are any 'company cars' in the old-school sense at my work.

Could have not had £400/month but claimed 'casual' mileage rate of 38p/mile (23p after 10,000 miles).

In retrospect, it may have been wise to not take the allowance - certainly the 12p/mile I get does not even cover the diesel in the tank, let alone any running costs.

38p per mile runs cars at the very cheapest end of the scale or family sized cars bought a few year old and run into the ground. It's a con but the HMRC limit is 40p per mile, because apparently it's sufficient for everyone. I cannot find a new family sized car that can be run at 40p per mile - as per What Car costs.