Company Car Vs Cash in Lieu on new job

jamieandthemagictorch

I just completed my 6 month probation, so now am in my job.

as part of the offer I have a company car Golf TDI 2.0 SE (602/1205 which car company car tax levels)

Now 1st things 1st, I understand the 22/40% tax break. however this is where it gets confusing.

I am currently paid £34000 (under the 40% marker) plus a co 6% paid into stakeholder pension & another 6% into bupa (these are on top of my salery), but I have been offered £4400 cash in lieu of a company car. Is my theory right that this would take me over the 40% tax threshold & therefore £4400 taxed at 40% ?

I currently do about 30,000 private miles a year (110mile round trip to work) in a 8 year old 140,000 mile 32mpg car (so its going to need replacing very soon anyway). & I expect to do around another 10,000miles for the company.

they say they will pay £0.13ppm for the fuel in my own car (so would need to claim the difference back).

because this cash in lieu takes me over the 40% marker, I am really confused as to how to go about calculting if this is worth while or not.

& on top of that I'm also confused as to how the BIK & P11D is worked out, as there seem to be 2 rates (as metioned above for the golf)..........so if my salery just creeps over the £34800 40% bracket, at say 34801 I will pay £1205pa for the golf. Yet if it stays at £34000 it will cost me just £602 pa

I've already got RAC cover, but the current cars blowing oil past the pistons at a rate of 2 litres every 1000 miles - so its not got long for this world.

the job & Co. seem fairly secure, & I see myself here for a while.


Heeeeeeelp

BillScarab

From what you've said you're going to be doing around 40,000 miles a year? I would take the company car every time.

I think once you added the benefit in kind amount for the comapny car you will be in the 40% bracket anyway so wil pay tax at 40%. Even so it's only £100 a month for a brand new economical car. If you take the cash you'll have £2640 a year left after tax to buy and run your car.

If you go for the company car you'll be abel to cancel your RAC Cover as well.

Hintza

On the mileage you are talking about you just don't want the hassle, time and expense of dodgy 2nd hand cars on your mileage I agree with Bill.

Regardless of the cost element, you must be spending 2-4 hours travelling a day just getting to and from work (depending on road conditions). They are offering you a nice car (which I presume meets your social needs).

I think I would go with the flow and take the company car.

I have run the figures through Glass's on a year old Golf TD and based on 12k miles versus 40k miles, this results in just under a further £2k reduction in the residual value of the car after 12 months.

No brainer in my view, but will be interested in seeing what others think.

markelock

I took the money (more money and cheap car) but wouldn't based on that mileage.

the income tax rates change as of April. I thought they went up to £43k until 40% kicked in.

If in doubt, check with your HR dept?

BillScarab

markelock wrote: »

I took the money (more money and cheap car) but wouldn't based on that mileage.

the income tax rates change as of April. I thought they went up to £43k until 40% kicked in.

If in doubt, check with your HR dept?

If only, according to HMRC the 40% band is going up to £37,400

http://www.hmrc.gov.uk/rates/it.htm

Wally75

To calculate the level that 40% tax kicks in you need to add in the personal allowance (which you don't pay any income tax on). Therefore, in the current tax year 40% kicks in above £40,835 and from April it will be £43,875.

Hope this helps

Wally

BillScarab

Wally75 wrote: »

To calculate the level that 40% tax kicks in you need to add in the personal allowance (which you don't pay any income tax on). Therefore, in the current tax year 40% kicks in above £40,835 and from April it will be £43,875.

Hope this helps

Wally

Cheers Wally, forgot about that.