Should I Take A Company Car?

Heidi_2

I have recently changed jobs and have the choice of getting a company car or taking cash in lieu (£450 a month) I actually need a new car but the one i want means I would have to pay an extra £50 a month over my allowance. People are telling me it's not as good a benefit as it used to be but free insurance/servicing etc etc as well as the chance to drive a car I would not be able to afford normally sounds great!! I know I could get a car within my allowance but I really want this one?
Am I letting myself in for a tax shock - I don't really understand the tax implications of company benefits but I know you don't get owt for nowt!
Can anyone illuminate me or point me towards any on-line info?
Cheers

dori2o

can you give the list price of the car. the Co2 value and tell us whether it is petrol or diesel?

Heidi_2

It's £19k; petrol and CO2 of 212.

bootman

If you are a 40% tax payer then a £450 a month car allowance is not going to go very far.

Heidi_2

Yes I am a 40% payer but I'm not sure what you mean bootman - the car I have chosen is £500 a month so I have to put £50 of my own towards it; which I am prepared to do. What I don't understand is what the 'real' cost of a company car is - would I be better taking the cash in lieu and buying my own (albeit a runaround as opposed to the company car I could choose) and then paying for services, insurance, MOTs and any other repairs? The cash in lieu allowance is obviously taxable too so I'd probably come out with around £200?

BoGoF

Before an accurate calculation can be made then we need to know if the £50 pound a month is a 'capital contribution' or payment made towards private use - check with your employer.

There is a calculator on the HMRC website which will tell you the tax consequences - http://www.hmrc.gov.uk/calcs/cars.htm

dori2o

BoGoF wrote: »

Before an accurate calculation can be made then we need to know if the £50 pound a month is a 'capital contribution' or payment made towards private use - check with your employer.

There is a calculator on the HMRC website which will tell you the tax consequences - http://www.hmrc.gov.uk/calcs/cars.htm

OP has already advised the £50 contribution is to get a better car, so it is a capital contribution.

Based on the information you have provided the benefit of the car would be approximately £5520 per year. and would cost on average £1104 per year (£92 month) in extra tax if you are a 20% tax payer (Total income including benefits less than £40835) or £2208 a year (£184 month) if your income including benefits is in excess of £40835).

The tax on the £450 per month would be either £90 month if tax paid at 20%, or £180 month if a 40% taxpayer.

So you have to consider whether having a car which you have no servicing costs for, no insurance to pay etc, is mnore benefitial than running your own car with the £450 month car allowance.

bootman

bootman wrote: »

If you are a 40% tax payer then a £450 a month car allowance is not going to go very far.

As the previous post has said, £450 car allowance will have £180 taken off in tax, leaving you with £270 to run, service and tax your own car.

CLAPTON

comparing like for like
the two options are
a. take the company car.... this decreases her salary by 184 per month
or
b. to take the money that increases her salary by 270 per month


so she has 184 + 270 (= £454) per month to fund a car if she is willing to have a salary the same as she will receive if she takes the company car

of course you buy a cheaper car and have a higher salary

olivetti

This site will let you know:

http://www.cashorcar.co.uk/

Any

CLAPTON wrote: »

comparing like for like
the two options are
a. take the company car.... this decreases her salary by 184 per month
or
b. to take the money that increases her salary by 270 per month


so she has 184 + 270 (= £454) per month to fund a car if she is willing to have a salary the same as she will receive if she takes the company car

of course you buy a cheaper car and have a higher salary

Hi Clapton,
I am Fleet Support Executive of many years and deal with these sort of questions every day. You are the only one that actually explains it in full and the above answer is absolutely spot on.
Of course I know you are tax expert (from previous posts), but you are one of the few who can actually explains it to people in detail and clear words.
Maybe it would be worth doing a "sticky" on a company car?