Company Car Vs Allowance

mighty_rhinos

Fingers crossed I'll have two job offers this coming week. Both companies are in the same markt, same product, job title. Direct competitors really.

Trying to compare the car schemes in my decision of where to go if all comes off!

1) Salary £30K plus £5K bonus, car is company car scheme typical sales rep car Audi A3 / Avensis / Ingnia. 25 days holiday

2) Salary £28K, plus £7-8K bonus. Car is allowance of £575 per month. Few restrictions on type of car. Existing team have Audi A4, Jaguar, Honda CRV, etc.

I have only ever had a strange car scheme with one employer where they loaned me money and then worked out running costs and all sorts (see other posts in this forum - I ended up £2K in debt to tax man for 2010-11!) or "pure" company car scheme.

If I take an allowance is effectively £575 in my wage each month, and therefore taxed as part of my gross earnings. i.e. Rather than £2333 per month gross, would I be taxed on £2333 + 575?

Is this £575/month on P11D?

I read that I could also claim 40p/25p mile tax back - would this apply if they provide fuel card and I pay private mileage?

Anyone got any useful info or advice on allowances. Thanks

maple41

You can claim back the tax on the difference between what the company pays you for business mileage and the 40p for the first 10,000 business miles (but it seems to take an age to get the money from HMRC). If you go for the car allowance you will be taxed on it. So £28k + £7K bonus + £6.9k car allowance plus any other benefits you get will be taxed after allowances.
If you take the car don't forget that it will appear on your P11d as a benefit and you will be taxed on it as a benefit based on the list price.
Best money saving tip is if you don't do mega miles is to take the cash allowance and buy a 1 to 2 year old good car that you like and save depreciation, Change it when want, not when the company says.

mighty_rhinos

sorry to sound daft........but!

If the company gives me a fuel card, I wouldn't be claiming any business miles then? They pay the whole fuel bill, I reimburse them for my personal miles presumably.

Mileage is about 20,000 per year.

So, car allowance would be paid in salary - I pay tax, NI, student loan including that amount, but no P11D benefits like I gte on current company car.

Need to do some sums today I think.

Any

If they give you fuel card, make sure you always declare your private mileage and they deduct it from you wages - otherwise you will end up paying tax on that as well!!

Tim_Nicholas

Take the money...

Any

Have a look here http://forums.moneysavingexpert.com/showthread.html?t=1812785&highlight=company+car+allowance

Torby

Any wrote: »

If they give you fuel card, make sure you always declare your private mileage and they deduct it from you wages - otherwise you will end up paying tax on that as well!!

is there an easy explaination for this...sorry to jump on this thread, I had started one of my own about a similar sort of question...that person is to be given a "fuel card"....but so far they havennt been told how it works...its to be discussed at a later date....I was wondering if someone can explain the implications to me...re tax...personal mileage...etc....

again...sorry to jump on here...saves starting a new thread...and someone else may benefit from my question...:beer:

Any

Torby wrote: »

is there an easy explaination for this...sorry to jump on this thread, I had started one of my own about a similar sort of question...that person is to be given a "fuel card"....but so far they havennt been told how it works...its to be discussed at a later date....I was wondering if someone can explain the implications to me...re tax...personal mileage...etc....

again...sorry to jump on here...saves starting a new thread...and someone else may benefit from my question...:beer:

Well, basicaly everything you get for free or for heavily discounted price from your employer is benefit, the same as you your wages and therefore taxable.

If you are white van driver and personal use is only accidental (journey to and from work and maybe a shopping trip twice a month) you don't have to pay tax on the benefit of having a van - that was made exception few year ago.

Otherwise, if you have a nice car, unless it's parked at work over night (no benefit of having it) - it is benefit and you get taxed.

And so it is with fuel - if you get free fuel for your private journeys (which in the company car is even journey to and from work) you get taxed on that benefit.

BUT you can get out of paying this tax if you keep record of your business/personal mileage and pay your employer for the personal mileage you have done. The easiest way to do this is to pay the recommended HMRC rate (currently 10p a mile on 1400-2000cc diesel car-changes twice a year to reflect changes in the price of fuel).

Our lads for example take the mileage on the car on the beginning of the month, then on the end, write up all the business trips in the month and the difference is private mileage. We then deduct the amount from their wages and the tax man is happy.

However there are people who live far from work, have very economic car or whatever and they have the option to get free fuel from eployer (quite often higher or top managers) and get the car really only as a perk of the job - in these cases it might actually work out cheaper to pay the tax on the fuel and save yourself the hassle. But generally you would have to live some 50 miles from your work for this to be the case. Again - the calculation depends on the type of vehicle.

Torby

Hi ANY...jumped to my rescue again....I've done a wee bit more research...does this sound right?

Employer issues "fuel card"
Employee fills car when required
End of each month employee records business/private mileage
Employee reimburses employer for "private mileage" @ 10p/mile (or see below *)

At the end of a year (if worthwhile) employee can calculate business miles and claim tax relief on the 30p (difference between 40p normal allowance and 10p allowance as on fuel card, equivalent of about 0.06p/mile if taxed at 20%)

*If employer allows employee to use fuel card for business and private, private will be treated as "benefit in kind" and tax applied accordingly.

HMRC have a "all in one" figure of 40p/mile for the first 10,000 miles, this covers wear/tear, servicing etc...if the employer issues a "fuel card" which covers business & private mileage (private taxed as a benefit) or just business mileage (employee reimburses employer for private)...where does wear & tear etc come into the equation?

Is the above scenario where the employer then makes a payment (typically monthly approx 10% of salary which is taxable as a benefit) called "car allowance"?

Does a "fuel card" and "car allowance" normally get packaged together?

Who benefits most from a "fuel card", "fuel card/car allowance" or typical "40p/mile allowance for business miles"?

Am I right in thinking the employer for the first one, slight benefit for employer and employee on the second one, and most benefit for the employee on the last one (dependent on mileage of course)

If there is a "fuel card" given to employee and it only covers business mileage @10p/mile (small 1.2 petrol car), is the employee disadvantaged because in the absence of a "car allowance", they are responsible for servicing costs, wear& tear etc of the vehicle themselves?

Well I think that covers everything (if not feel free to add to it), if I've got it right, it obviously helped when typing it all in!....easier to see things.

Any

40p a mile is only where employee provides his own car-and should cover fuel AND tear and wear of the car. If you have car allowance, then again it's the same as having company car - Car allowance should cover all of the cost of the car. It very unlikely does, but that is why people are quite often better off taking company car.
Also it depends whether it is just part of the package or actually has a line on the payslip "car allowance" I believe. The rules on this are within grey area.


So if employee has company car and uses fuel card - he pays employer for private mileage - 10p and gets nothing else

If employee has company car and pays for fuel himself - employer pays him 10p a mile and nothing else.

If employee has his own car, no car allowance and gets fuel card - which would be incredibly stupid and noone in they right mind would do it - then you can claim the extra 30p tax RELIEF (so you don't get the cash back, just relief on your tax) on the end of the year.

Torby

so I'm right in thinking...

employee uses own car...has fuel card...pays employer for private miles...gets no car allowance....effectively the employer is only paying them 10p per mile (plus whatever tax relief, 0.06p/mile).....employer is basically ripping them off as all wear & tear, maintenance costs etc are down to the employee...bummer....

if you don't get a reasonable mileage allowance then that covers everything, you'd be best to say...ok...I'll drive to my work location in my own car....then you provide me with a taxed/insured/fuelled/serviced roadworthy car to visit clients...because basically, unless they get the appropriate mileage etc to cover ins and all these costs, they wont be using their own car...