Company Car and Fuel Benefit- Tax

Dan1983

Hi,
I will be starting a new job in June. I have been offered a company car which is a Ford Mondeo 1.8 LX. I understand that the tax is based on the car price list and CO2 emission.

I have never had a company benefit and need some much needed advise on how much tax I will be paying for the car and the fuel card. I will be taking the full private fuel beneift.

I will be very gratful for your help on this.

:eek:

Lyndsay101

Hi

You can calculate the car and fuel benefit for the tax year at HMRCs website. If you google company car benefit its the first link that comes up.

You're correct, its based on the calculation of your co2% multiplied by the list price of the car. The calculator does all of this for you. If you dont know your CO2 emissions figure you can look this up on the link provided by HMRC.

In respect of the fuel benefit, you should think carefully before taking it. I assume you are giving up some salary/other benefit to take up this offer? Employer provided fuel is taxed heavily by HMRC. It is calculated by multiplying £16,900 by the CO2%. (for 08/09.. may have increased) For the (very) average car, this could give you a charge of approx £4500 (increasing depending on how 'dirty' the car is - HMRC website will give you the figure) that goes straight into your tax calculation (normally deducted from your personal allowance.

If your a high rate taxpayer, you could end up paying £'000s in tax just to have this benefit, if you're a Basic rate payer its still a hefty sum! To calculate whether its worth your while, you should consider the amount of mileage you'll be doing & consider the cost of petrol. Once you have a rough figure in mind, compare this to the tax charge you're being hit with. (bear in mind also that the Company are still paying for the petrol too) If the likely costs are less than the tax charge, you shouldnt take the benefit. If the costs exceed the tax charge, consider what you've given up to take the private full - i.e. have you accepted a lower salary?. factor this reduction in to the costs and compare the 2 figures again.

More often than not, it works out cheaper for the employee not to take private mileage! You have to have a very clean car, and cover a lot of private miles for it to be cost effective.

Hope this helps.

If you struggle with the comparisons/my descirptions let me know and i can help out

L

AnxiousMum

Would the employer consider paying you mileage for your own personal car use rather than company car? I get 40p per mile mileage - but because it falls under HMRC's guidelines, it's not a taxable benefit. Unfortunately I don't know anything about the consequences of a company vehicle, as my company offered me the choice. I like knowing where I am tax wise when the end of the year comes!

homerjh

the Co value then determines the % of the total cost you pay. I have a mondeo and will pay around £840 a year in tax. However if i had chose for example a VOLVO S40 4DR 1.6DRIVe SE LUX then this would only be £598, £20 a month less (but same value car), so all depends on the Co really.

I also have the milage capture, this essentially means everything is paid on the supplied card and at the end of the month the total and business miles are entered, and i get charged for the milage.

so say i spent £200, did 2000 miles, 300 being personal then i would get charged £30.

£200 / 2000 = 10p a mile (it gets put into 1 big pot) and then 300 miles * 10p = £30

However this can have some odd results, say i did 2500 miles and 2200 were business and 300 personal then :

£200 / 2500 = 8p a mile, so i would then get charged £24 for the same personal milage

homerjh

as an added bonus, for the £840 i pay thats it for the car. I dont pay for tax (£130+ a year), tyres (ie puncture or wear), any servicing, breakdown cover, insurance/etc.

all depends on milage. If i did 1800 miles then i would get £720 a month @ 40p a mile, (i worked out my old car was costing around 13p a mile), but i would never be able to afford a £25k car, and after 3 years i get another one!