company car vs car allowance

jennifernil

Yes, that's correct. That is what HMRC allow you to receive tax free, but your employer can decide how much to pay you.

If they pay 15p, then for the first 10000 miles you can claim tax relief on the other 30p. So if you drive 10000 miles on business and are in the basic rate tax band you get tax relief of (10000 x 30) x 20%, which is £600 less tax to pay.

robinspain

Hi
Thanks for the reply.
So the figures on the HMRC website are guideline for what i can expect my company to give me as a fuel allowance.
There is quiet a difference between the 15p and 45p payment. If i am getting a 5k car allowance, what should i expect my company to pay me for mileage? does anyone have any figures they can give me with regards what they receive?
I understand that regardless of what i receive, i can use the figures for tax relief as well
Thanks

GRM

robinspain wrote: »

If i am getting a 5k car allowance, what should i expect my company to pay me for mileage? does anyone have any figures they can give me with regards what they receive?
I understand that regardless of what i receive, i can use the figures for tax relief as well
Thanks

I get a 6k car allowance and 45p/mile for using my own car.

zagfles

robinspain wrote: »

Hi
Thanks for the reply.
So the figures on the HMRC website are guideline for what i can expect my company to give me as a fuel allowance.
There is quiet a difference between the 15p and 45p payment. If i am getting a 5k car allowance, what should i expect my company to pay me for mileage? does anyone have any figures they can give me with regards what they receive?
I understand that regardless of what i receive, i can use the figures for tax relief as well
Thanks

If you have a car allowance the company will usually just pay for petrol for business mileage, as the allowance is supposed to cover all the other costs. So about 15-20p per mile. Otherwise they'd be paying you twice for the same thing.

But as far as HMRC are concerned the allowance is irrelevant, it's taxable income so is just like part of your salary and taxed as such. So you can claim tax relief on the difference between what the company pay you and the HMRC limit - so that you get tax relief on the part of the running costs incurred by company mileage.

jennifernil

robinspain wrote: »

Hi
Thanks for the reply.
So the figures on the HMRC website are guideline for what i can expect my company to give me as a fuel allowance.
There is quiet a difference between the 15p and 45p payment. If i am getting a 5k car allowance, what should i expect my company to pay me for mileage? does anyone have any figures they can give me with regards what they receive?
I understand that regardless of what i receive, i can use the figures for tax relief as well
Thanks

Not exactly. The 45p is what you are allowed tax free to cover, fuel, RFT, insurance, servicing, repairs and depreciation. Where a company car is provided, the recipient only has to add fuel, hence the 15ppm.

Your employer may think that the £5k allowance (less tax) he is giving you should cover everything except fuel, which IMHO it possibly would not, depending on whether you need to provide a car you would not otherwise have needed, and how far you drive.

So basically, depending on the above, your employer is possibly being rather stingy.

Presumably you still have the option to take the company car? You need to do the arithmetic.

saferider

Hi,

I also have the same question, I have been taking the cash option for the last 2 yrs (340 pcm), if i go for a company car i can get abt 375, I currenty use a 10 yr old car with loads of miles on it without any major issues my yearly maintanance is less than 500£. since my family has become bigger planing to get a bigger car, the car which i am interested has the highest CO2, hence the policy faq says my tax is 1920pa, I am in the 40% tax bracket.

I have 0 business miles, drives about 8k personal miles an yr. my employer gives the option as a status car user.

not sure whether i am better off buying a car outright (not a new one, 2-3 yrs old) or go for a company car. any advice.

Thanks,

robinspain

Hi
Thanks again for the replies, and giving me plenty to think about.
I dont have the option of a company car, just the car allowance, I cover about 25k per year on business mileage, and maybe 3k per year private, so my car is definately a work tool.
I am being told by my employer that the offer they have made me is a very good one, unfortunately i am in a unique position within my company and so cant really compare with other work collegues, so an further feed back would be great
Thanks

getmore4less

robinspain wrote: »

Hi
Thanks again for the replies, and giving me plenty to think about.
I dont have the option of a company car, just the car allowance, I cover about 25k per year on business mileage, and maybe 3k per year private, so my car is definately a work tool.
I am being told by my employer that the offer they have made me is a very good one, unfortunately i am in a unique position within my company and so cant really compare with other work collegues, so an further feed back would be great
Thanks

£5kpy and 15ppm for 25k business miles looks mean, not generous.

Tax on the £5k will make it hard to run a car on that money.

15ppm will just cover the fuel these days unless you get something very economical.

jennifernil

I would agree, 25k business miles will mean more frequent servicing and high wear and tear.

Is it in your contract of employment that you must provide a car to use in your job? If not, you could theoretically decline to do so.

My OH is retired now, but in 2007 was receiving £635 pcm allowance and around 35ppm. He was however fairly senior.

The £5k allowance after basic rate tax is £4k. Spread over just the 25k miles that is 16ppm, plus the 15ppm, is only giving you 31ppm.

Then tax relief on 30ppm for 10k miles plus on 10ppm for the other 15k miles is £600 + £300, so £900 tax relief at basic rate.

Spread that £900 over the 25k miles you effectively get another 3.6ppm, bringing your total to 35.6ppm.

You are allowed to have £4500 + £3750 tax free under HMRC rules, which if spread over 25k miles is 33ppm, plus your employer can pay you a taxed allowance if they wish.

So really your employer is using other taxpayers to subsidise your costs.

zagfles

getmore4less wrote: »

£5kpy and 15ppm for 25k business miles looks mean, not generous.

Tax on the £5k will make it hard to run a car on that money.

15ppm will just cover the fuel these days unless you get something very economical.

He won't be paying tax on £5000, he'll only be paying tax on £500 of it, since he'll get tax relief on £4500 of the allowance if he does £25k miles: 10000*(0.45-0.15)+ 15000*(0.25-0.15).

Though he will pay NI on the whole lot - won't be much if his salary is over the UEL (about the same as higher rate tax - £42.5k).

Tax plus NI would be £300 if salary over £42.5k, or £700 if not.

So allowance worth either £4700 or £4300 net. Should be easily enough to pay the running costs & depreciation on a reasonable car.