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    • owainjones
    • By owainjones 16th Mar 17, 11:52 AM
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    owainjones
    Company Car / Car Allowance Questions
    • #1
    • 16th Mar 17, 11:52 AM
    Company Car / Car Allowance Questions 16th Mar 17 at 11:52 AM
    Hi,

    I've currently got a company car, but have been given 12 months notice that it is to be replaced with a 5000 / year car allowance instead.

    I've got a few questions...

    1) Is the 5k/year taxable?
    2) I will need to take out a personal loan to initially purchase a vehicle - can I claim tax relief on the interest as I'm using it to purchase a car for work use?
    3) I was going to open a separate "Flexi Savings" account and transfer the car allowance from my main current account to the savings account on a monthly basis and pay off the loan from that, then leaving the remainder in that account to pay for tax/insurance/servicing etc.

    Would that be the best way to do it? Any other hints/tips for this setup going forward?

    Many thanks!
Page 1
    • Rain Shadow
    • By Rain Shadow 16th Mar 17, 11:57 AM
    • 1,716 Posts
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    Rain Shadow
    • #2
    • 16th Mar 17, 11:57 AM
    • #2
    • 16th Mar 17, 11:57 AM
    1. Yes
    2. No
    3. If it works for you
    You can pick your friends and you can pick your nose but you can't pick your friend's nose.
    • DoaM
    • By DoaM 16th Mar 17, 12:00 PM
    • 2,273 Posts
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    DoaM
    • #3
    • 16th Mar 17, 12:00 PM
    • #3
    • 16th Mar 17, 12:00 PM
    You should really do some analysis ... you may well find that 5k is a lot less (equivalently) to what you currently get as benefit in kind for your company car. Remember also that you'd have to also account for insurance, servicing and other maintenance costs.
    Diary of a madman
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    • Rain Shadow
    • By Rain Shadow 16th Mar 17, 12:05 PM
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    Rain Shadow
    • #4
    • 16th Mar 17, 12:05 PM
    • #4
    • 16th Mar 17, 12:05 PM
    You should really do some analysis ... you may well find that 5k is a lot less (equivalently) to what you currently get as benefit in kind for your company car. Remember also that you'd have to also account for insurance, servicing and other maintenance costs.
    Originally posted by DoaM

    The OP doesn't appear to have been given a choice.


    I've currently got a company car, but have been given 12 months notice that it is to be replaced with a 5000 / year car allowance instead.
    You can pick your friends and you can pick your nose but you can't pick your friend's nose.
    • DoaM
    • By DoaM 16th Mar 17, 12:28 PM
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    DoaM
    • #5
    • 16th Mar 17, 12:28 PM
    • #5
    • 16th Mar 17, 12:28 PM
    Perhaps. And perhaps the OP hasn't even thought to question the amount being offered, and may be in a much stronger position to negotiate a better deal if OP does some analysis?

    (I'm speaking from experience. Some of my colleagues from another division were faced with the same event. Those that did the analysis managed to negotiate a much better deal (~2k per annum extra) than those who simply accepted what the company told them).
    Diary of a madman
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    Entries of confusion
    Dear diary, I'm here to stay
    • jimjames
    • By jimjames 16th Mar 17, 2:05 PM
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    jimjames
    • #6
    • 16th Mar 17, 2:05 PM
    • #6
    • 16th Mar 17, 2:05 PM
    Check what the requirement is for the vehicle. My wife gets a car allowance of a similar amount. The car she has is a 16 year old VW Golf. If it's not specified it doesnt need to be new and I certainly would try to avoid a loan.

    Also remember you can claim tax relief on the difference between your mileage rate paid and the HMRC level
    Remember the saying: if it looks too good to be true it almost certainly is.
    • AdrianC
    • By AdrianC 16th Mar 17, 3:35 PM
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    AdrianC
    • #7
    • 16th Mar 17, 3:35 PM
    • #7
    • 16th Mar 17, 3:35 PM
    2) I will need to take out a personal loan to initially purchase a vehicle - can I claim tax relief on the interest as I'm using it to purchase a car for work use?
    Originally posted by owainjones
    No, not least because you don't need to borrow money to purchase a car. You do not need to own the car. You could lease it, PCP it, or otherwise finance it, meaning you don't have that upfront purchase.

    OTOH, you don't have an asset, either.
    • dannyrst
    • By dannyrst 16th Mar 17, 4:30 PM
    • 1,375 Posts
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    dannyrst
    • #8
    • 16th Mar 17, 4:30 PM
    • #8
    • 16th Mar 17, 4:30 PM
    Check what the requirement is for the vehicle. My wife gets a car allowance of a similar amount. The car she has is a 16 year old VW Golf. If it's not specified it doesnt need to be new and I certainly would try to avoid a loan.

    Also remember you can claim tax relief on the difference between your mileage rate paid and the HMRC level
    Originally posted by jimjames
    I thought it was an allowance, effectively a bonus. Can an employer specify which cars you can buy?
    • AdrianC
    • By AdrianC 16th Mar 17, 4:36 PM
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    AdrianC
    • #9
    • 16th Mar 17, 4:36 PM
    • #9
    • 16th Mar 17, 4:36 PM
    I thought it was an allowance, effectively a bonus. Can an employer specify which cars you can buy?
    Originally posted by dannyrst
    Absolutely. They're paying an amount specifically intended for you to supply a vehicle suitable for your use on company business. They definitely get to specify what that means.
    • DoaM
    • By DoaM 16th Mar 17, 4:47 PM
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    DoaM
    The car policy at my company states that the vehicle must be diesel and have 4 driver/passenger doors. Whilst there can be some relaxation of the policy for people with the allowance, the company can still insist that the policy is followed - after all, they're the one giving you the money for the car (rather than arranging the supply of the car themselves).
    Diary of a madman
    Walk the line again today
    Entries of confusion
    Dear diary, I'm here to stay
    • dannyrst
    • By dannyrst 16th Mar 17, 4:47 PM
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    dannyrst
    Absolutely. They're paying an amount specifically intended for you to supply a vehicle suitable for your use on company business. They definitely get to specify what that means.
    Originally posted by AdrianC
    Interesting. I always assumed it was just a bonus, like for example I get a bonus for being on-call. Never needed/had a company car.

    Will certainly take note for future if a job comes along with a company car allowance.
    • owainjones
    • By owainjones 16th Mar 17, 4:48 PM
    • 7 Posts
    • 0 Thanks
    owainjones
    Thanks for the replies.....

    To compare company car vs car allowance, on my HMRC letter do I check the "Less Car Benefit" line? If that is more than the car allowance am I loosing out?

    With regards to car leasing, I do in excess 40,000 miles a year and can't find a decent car lease that will provide a car for that amount of mileage.

    My only concern is once the vehicle is taken away, I'll effectively get 5,000 / year which will be 333.33 a month (after tax). This is no way enough to purchase a vehicle, never mind the ongoing maintenance/insurance/tax/breakdown etc.
    • AdrianC
    • By AdrianC 16th Mar 17, 4:55 PM
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    AdrianC
    5k/yr before income tax, don't forget.
    • owainjones
    • By owainjones 16th Mar 17, 5:02 PM
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    owainjones
    5k/yr before income tax, don't forget.
    Originally posted by AdrianC
    So in my first post where I asked is it taxed, are we saying it's not?

    So for 5000/year will it be

    333.33 cash a month or 416.67 cash a month?

    Thanks
    • jimjames
    • By jimjames 16th Mar 17, 5:03 PM
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    jimjames
    I thought it was an allowance, effectively a bonus. Can an employer specify which cars you can buy?
    Originally posted by dannyrst
    Yes they can. Maybe not a specific model but a car with 4 doors less than 5 years old for example. Fortunately ours isn't specified other than being 4 door.
    So in my first post where I asked is it taxed, are we saying it's not?
    Originally posted by owainjones
    Not sure why you now think it's not taxed. Every reply has stated clearly that it is taxed. We can't say what you get after tax as it will depend on your tax rate and circumstances. Not sure if it's subject to NI too?

    It could be as low as 229 per month if you paid 45%
    My only concern is once the vehicle is taken away, I'll effectively get 5,000 / year which will be 333.33 a month (after tax). This is no way enough to purchase a vehicle, never mind the ongoing maintenance/insurance/tax/breakdown etc.
    Originally posted by owainjones
    It's exactly the same amount we get. I can confirm that it definitely is enough to purchase a vehicle and pay for running costs, in fact we are substantially in profit over the year. Maybe you need to look at different vehicles.
    Last edited by jimjames; 16-03-2017 at 5:36 PM.
    Remember the saying: if it looks too good to be true it almost certainly is.
    • Car 54
    • By Car 54 16th Mar 17, 5:04 PM
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    Car 54
    Interesting. I always assumed it was just a bonus, like for example I get a bonus for being on-call. Never needed/had a company car.
    Originally posted by dannyrst
    But your bonus also comes with conditions. Presumably you need to answer the phone when on call, and do some work if needed?
    • AdrianC
    • By AdrianC 16th Mar 17, 5:09 PM
    • 13,969 Posts
    • 12,369 Thanks
    AdrianC
    So in my first post where I asked is it taxed, are we saying it's not?

    So for 5000/year will it be

    333.33 cash a month or 416.67 cash a month?
    Originally posted by owainjones
    You are being paid 5,000 before tax. 416.67/mo. If your personal income tax rate means that works out to 333.33, then - yes - 333.33 after tax. Sorry, I just saw the 5k figure and didn't bother with the /12 bit.
    • basill
    • By basill 16th Mar 17, 6:24 PM
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    basill
    Don't forget you will no longer be paying tax on the benefit that is your existing company car.
    • loskie
    • By loskie 16th Mar 17, 7:13 PM
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    loskie
    you will also be claiming a mileage rate for business use I would expect. Currently HMRC is 45ppm for the first 10000 then 25ppm thereafter
    • jimjames
    • By jimjames 16th Mar 17, 11:26 PM
    • 11,788 Posts
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    jimjames
    you will also be claiming a mileage rate for business use I would expect. Currently HMRC is 45ppm for the first 10000 then 25ppm thereafter
    Originally posted by loskie
    Not normally. Ours is 10p if you're given a car allowance. You can claim difference on your tax return though
    Remember the saying: if it looks too good to be true it almost certainly is.
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