company car vs car allowance

solarstone

From the tax point of view is having a company car the same as getting a car allowance and buying/leasing one yourself ?

MarkyMarkD

Not remotely the same.

If you get a car allowance, the whole allowance is taxable income, but you can offset against tax the actual costs of running your own car (or the Inland Revenue's standard allowances for running your own car, whichever is better for you).

If you get a company car, the Inland Revenue calculated taxable benefit is subject to tax as if it's income.

Your circumstances will determine whether it's better to take the company car or not, but if the allowance is a fair one it's probably worth having the car if you do LOADS of personal mileage, but not worth it if you do hardly any personal mileage.

I say this because the personal mileage is the benefit you get which isn't taxed on a marginal basis.

There are company car calculators on a number of leasing company websites, but they generally compare buying a brand new car yourself (at full list price) with having a company car. If you would in fact run a nearly-new (or even older) car, the costs of that option would likely be cheaper, weighting the decision from the suggestion they will make.

nearlyrich

Not really the same at all, you get an allowance pay tax and NI on it before you receive it, you usually have to pay for the car plus all maintenance and insurance from the allowance.

With a company car you get a taxable figure dependant on the emmissions and the retail cost of the car when new. This figure is added to your earnings and you pay tax on the total. If the company give you a fuel card that is taxable too.

I pay £115 a month tax for a new £20k car every 2 years, pay for my own fuel and get 11p per business mile from the company. Hope that helps.

Astaroth

My employers have a rather odd way of doing these things - we dont get any benefits as standard other than discount on own products but get a catalogue of items you can buy as a benefits such as company car, pension, health insurance etc. We can also lease cars from them as a personal car rather than company car.

With all the cars I have been interested in (unfortunately all high CO2 output) then lease was much cheaper unless I was going to be doing mileage over 35,000 a year at which point company car was cheaper after paying for it and the BIK

solarstone

MarkyMarkD wrote:

Not remotely the same.

If you get a car allowance, the whole allowance is taxable income, but you can offset against tax the actual costs of running your own car (or the Inland Revenue's standard allowances for running your own car, whichever is better for you).

If you get a company car, the Inland Revenue calculated taxable benefit is subject to tax as if it's income.

Your circumstances will determine whether it's better to take the company car or not, but if the allowance is a fair one it's probably worth having the car if you do LOADS of personal mileage, but not worth it if you do hardly any personal mileage.

I say this because the personal mileage is the benefit you get which isn't taxed on a marginal basis.

There are company car calculators on a number of leasing company websites, but they generally compare buying a brand new car yourself (at full list price) with having a company car. If you would in fact run a nearly-new (or even older) car, the costs of that option would likely be cheaper, weighting the decision from the suggestion they will make.

My personal circumstances are that I would be doing minimal business mileage (<1000 p.a.) if any. The allowance is about £5k I think, so not huge. What would you say would be the best option with these circumstances ?

MarkyMarkD

£5k is a good car allowance - about the same as mine. It doesn't cost £5k a year for most people to run their own car, even if you do buy new.

Like I said, it's more the level of personal mileage which matters IMHO. If you are doing hardly any mileage IN TOTAL, it won't cost much to run your own car; if you are doing loads IN TOTAL, it will cost you a lot making the company car relatively more attractive.

solarstone

MarkyMarkD wrote:

£5k is a good car allowance - about the same as mine. It doesn't cost £5k a year for most people to run their own car, even if you do buy new.

Like I said, it's more the level of personal mileage which matters IMHO. If you are doing hardly any mileage IN TOTAL, it won't cost much to run your own car; if you are doing loads IN TOTAL, it will cost you a lot making the company car relatively more attractive.

I do about 18,000 personal a year so I guess this falls into the "semi-loads" bracket. The current car I have on a main dealer bubble, is worth the same as I owe. Hence ideally I'd like to shift that, to reduce monthly payments. Unless I am being particularly unintelligent (I did have a heavy night last night !! - :beer: ).... then it seems like the car, rather than the allowance, is the better option.

xbox

useful?

MarkyMarkD

Good link, xbox.

I agree with solar that 18,000 personal miles a year is semi-loads, and it would probably end up being better to take the car on those figures, as long as you can choose a car (or the car you have no choice about) that has low emissions so a low tax rate.

bradgirl

Thanks - that's a great tool! Seems to say that I should get a company car as it will save me money - problem is that I really want a 3dr and can't get that through the company!! But don't want to leave myself out of pocket....eeek, what to do??

David_Robson_2

I currently get an allowance of £5160 which is taxable etc plus I pay 10% pensions also from this allowance as it is added to my salary as a whole.
I cover roughly 17000 plus mile a year and receive 15p per mile with the rest claimed back at the end of the year.
The problem I have is that services come round far to quickly, tyres and road tax also.
The deal I have on my current car is 3 years 30,000 miles but every mile thereafter charged at a rate of 7p can this be claimed back by the tax man?
I had to pay £5000 deposit to get the payments down to £306 per month but the depreciation will be a further £6000/£7000 plus interest.

After tax/NI I'm left with roughly £270 per month how can you buy a car for this amount without paying a depsoit plus tax, tyre and service, its impossible.

I get roughly £1300 per year back after tax (claiming the mileage difference back from the inland revenue) but this is no where near covering my costs.

What can you advise?

Regards
Dave