Help, car allowance

CharlieCoffee1

Hi All

Please help me. I have just moved job, and will be starting in two weeks. With my new job, I get a car allowance which I understand to be £4500 per year. As I understand it, I have the option of taking the money, or using it to lease a car with a leasing company (Zennith). I am confused as to what I should do. I am a high rate tax payer. I do no business miles, and very little personal miles (4000 per year). Would anyone be able to confirm the logic:

1) If I take the car, my company will pay the leasing company a set amount of about £350 per month. Presumably, this will be done directly between my company and the leasing company, and all I have to pay is a tax for this benefit, which is related to the value of the car and the emissions. Would this be taken on payroll, by PAYE?

As I see it, this may be a good deal for me, as I can sell my current car (worth about £4000) and enjoy the cash. I will also be saving on my car insurance, MOT, tax etc equal to a £1000 per year, plus avoid the depreciation of the car I currently own.

This seems to be a no brainier, unless I am missing something? HELP!

2) I can take the allowance, and keep my own car. I will then enjoy the extra £350 income per month, which will be taxed at 40%.

Any thoughts or comments welcome! Thanks so much

village_life

CharlieCoffee1 wrote:

Hi All

Please help me. I have just moved job, and will be starting in two weeks. With my new job, I get a car allowance which I understand to be £4500 per year. As I understand it, I have the option of taking the money, or using it to lease a car with a leasing company (Zennith). I am confused as to what I should do. I am a high rate tax payer. I do no business miles, and very little personal miles (4000 per year). Would anyone be able to confirm the logic:

1) If I take the car, my company will pay the leasing company a set amount of about £350 per month. Presumably, this will be done directly between my company and the leasing company, and all I have to pay is a tax for this benefit, which is related to the value of the car and the emissions. Would this be taken on payroll, by PAYE?

As I see it, this may be a good deal for me, as I can sell my current car (worth about £4000) and enjoy the cash. I will also be saving on my car insurance, MOT, tax etc equal to a £1000 per year, plus avoid the depreciation of the car I currently own.

This seems to be a no brainier, unless I am missing something? HELP!

2) I can take the allowance, and keep my own car. I will then enjoy the extra £350 income per month, which will be taxed at 40%.

Any thoughts or comments welcome! Thanks so much

Hi

There are lots of things to weigh up in the car v's allowance debate - I went through it myself about 6 months ago for the first time and found it a bit of a minefield....

there are people better placed here to advise on the BEST option pennies wise, but my contribution is as follows:

1. you will get a selection of cars from various ranges, each of which will have a "cost" per month - this may be under or over your £350 allowance - if its under, you get the extra cash in your payroll (which is taxable), if its over, you pay the uplift from your gross salary....... the car you chose will have a "benefit in kind" - which is the sum you'll pay your tax on - and it gets included in PAYE

do you know how a lease car would work re: fueling - do you get a fuel card with personal mileage paid? - or is it the standard expensing business mileage approach!? - based on your circumstances detailed above DO NOT accept a private mileage paid fuel card - as the tax burden for so little personal miles (even from my limited knowledge) isnt worth it!

2. your summary is correct- however, if you need to travel with work remember 2 things, a) you are obliged to provide a car for work, so even if your own breaks down and you need to travel with work - they'll expect you to do so and b) you'll need to make sure its well maintained and insured for business purposes

for me, i was in the same position as you - i had a £4k value car that i didnt really want anymore as it didnt fit my lifestyle, and i had the option of a Saab via the company scheme - the benefits of not taxing,insuring,maintaining or worrying about a personal car is great, and i got the cash back to invest into my house deposit :-D

i go out to my car now and if it dont start, i dont care.... if it gets bumped, i dont care - its hassle free motoring, and i am comfortable paying the tax on it and "losing" the extra cash i'd get from a car allowance.....

the other way i look at it is i am getting my new £23k Saab next friday :j - having just bought a house, with a wedding in september there is NO WAY (in good MSE style) i'd be able to afford a brand new car anywhere near that class with the money i have available!

hope these thoughts help!

CharlieCoffee1

Thanks so much for your response. Its exactly what I needed to hear. I think I'm going to take the co. car. I'm surprised that more people don't do it if its such a good deal! Good luck witht he wedding, and the new place...

cash99

This is a good site to check the financial side of things.



http://www.cashorcar.co.uk/

dawn040774

I receive £218 per month in car allowance from work - with it I have been leasing a Renault Clio paying £175 for the lease and £25 for the maintenance each month.

Now it's time to decide whether to buy the car outright (after having had it for three years) for £2795, or give it back and start the leasing process again.

I like the idea of getting a cheap loan which I could repay within the £218 per month over two years and owning the car outright. I've had it serviced regularly over the three years, so servicing and MOT etc should be reasonable, and I can shop around for competitive insurance (currently paid by my company)

Or I could just give it back and get another brand new car!

If I had the lease car and left the co I could either give it back (and therefore need to buy a car anyway) or keep the car and keep up the lease until I was eligible to buy if after 3 years.

My husband and I disagree over this one so a few independent thoughts would help greatly

Many thanks....