Company Car or own with Allowance

AdrianHi

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.

IM

Road_Hog wrote: »

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

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:

IM

AdrianHi wrote: »

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:

Brilliant stuff - many thanks.

hewhoisnotintheknow

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

omelette451

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!

AdrianHi

omelette451 wrote: »

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

AdrianHi wrote: »

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

omelette451 wrote: »

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

https://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.