Cash or Car Allowance Question?

20vt-rs

Hi, I know this has been asked before but I am struggling to work out what to do.... It's time to change my company car, historically I've been able to get what I want within a monthyl budget, but now the company is stipulating to choose one of five cars and thats it. Is I don't like any of the cars they offer I am considering taking the allowance and opting out, however once you opt out thats it, you cannot opt back in so I must make the right decision.....

I do aopprox 25k per annum, 20k business and 5k personal. Company is offering £6300 per annum (£525 per month) and fixed 13p/pm claim back rate for diesel and 15p/pm on petrol. I would need to insure my car and have valid breakdown cover.

I would save around £95 per month in tax on my current car, but would pay tax and NI on the allowance... I also believe I can claim back the tax break on the difference between my 13/15ppm and the inland revenue rates, but this I believe is one a year?

I've been on the cash for car calculators and their answers vary quite a bit which is confusing me even more! Does anyone have any first hand experience in opting out, is it worth the hasstle? Lease or finance? Anything else I should be thinking about?

Thanks in advance....

standupguy

It's a big question but you have a big opportunity to make some money in addition to your salary.

Have they put any stipulation on what you can buy, how old etc?

For example you could buy say a 1 year old Vectra with say 10,000 ,miles with 2 years manufacturers warranty left for say £9000.
Run it for 3 years and sell it for over £4000 - so depreciation on 3 years = £5000.

Car allowance for 3 years = £6300 x 3 = £18900.

Cost of 9k loan for 3 years = £1300

Then it depends on your tax situation - do you pay 40%?

If not
Allowance 18900
tax at 20% on the allowance= 3780
Interest on the loan - 1300
Depreciation = 5000

In your pocket = £8820

As you say you can also claim the extra mileage expenses on your tax return but after the first year HMRC will increase your tax code so that you get these extra allowances monthly in your pay.

You also get your tax code increased for not having the comapany car.

Of course you will have to pay car tax and insurance but you should still come out £8000 better off?

If you like the status of new cars you may be better sticking with the company car but if you could compromise a bit, buy a nearly new car with a big wedge of depreciation already gone you are quids in!

It is like a second income!

20vt-rs

Thanks for the information standupguy, very useful. I've done a few sums, and while the allowance is pretty good. The 13ppm doesn't cover fuel at the prices they are currently. On my monthly mileage I'd be £80 out of pocket. After tax and NI my allowance goes down to approx £400 where I'd have to pay insurance etc etc. I'm not too bothered about having a new car, but I still think it's going to be a close call which I'd be better off with.

20vt-rs

Guys and gals, a bump of this old thread!

I need a bit of help understanding car allowances more and how to manage things from a monthly / yearly point of view. My current circumstance is a company car provided with a fuel card, however the company is dropping cars and moving to allowances and no fuel card. (Above info is different now including a lower allowance )

Current set up is:
Car for work and personal use, including spouse on insurance
Fuel card for all fuel put into the car
I re-pay monthly for private fuel out of my salary @ 11ppm and not taxed for private fuel

New set up would be:
Car allowance of £4700 per annum paid into salary monthly (£391.67)
No fuel card, claim back mileage at 11ppm up to 2ltr and 16ppm over 2ltr engine (diesel)

The allowance going into my salary would take me into the 40% tax bracket, is this a good or bad thing for me?

I understand that I can claim the tax relief back from the 11/16ppm and the government rates of 40ppm / 25ppm, is this a once a year thing or can the tax office do something so my monthly is better (my mileage per year is pretty much around the same ball park).

I realise that my current tax I pay for the company car would be saved, this is around £61 per month

I’ve looked at various calculators on line but am still baffled! In short, I’m trying to figure if this is a good or bad thing for me…

Thanks