Company Car Tax help.

tarajayne

I've searched the threads and am none the wiser but we are trying to work out if we are better off getting rid of the company car this year or just the fuel card.

If anyone can help I would be eternally grateful as it's soo confusing.

I have all his paperwork out so will list some...

Gross pay £45,873.
Tax code K396.
Car benefit £5512.
Fuel £4394.
Med Ins. £548.
Tax due on -£3979

He would get a £5000 allowance for no car and 40p mile. We worked out that he would do about 13k private miles a year. Anything I've missed???

I tried to work it out and just based on wages now it said we'd be £500 per month better off so then would add the £5000 allowance but I could well be way out!

Lyndsay101

There is quite a few things to consider when you make your decision.

For your private fuel take the number of private miles, multiply it by the price of fuel per gallon (say £4.10) and divide that number by the miles per gallon

i.e. 13,000 * 4.10 / MPG = X

compare X to the fuel benefit of £4,394. If X is lower then you should opt out of the fuel card.

He will have his business mileage reimbursed only , likely to be at 40p per mile for the first 10,000 miles and 25p thereafter. These amounts are tax free. They are meant to compensate you for the cost of fuel and the damage to your car. It will mean keeping records of mileage travelled for business though - a slight inconvenience.

Then for your car, add up the cost of buying a new equivalent car for the year (divide it by the number of years youll keep the car - say a £28,000 car for 4 years = £7,000 per year). Add to this figure the cost of any annual financing, insurance, road tax. Deduct the £5,000 allowance from this, after it has been taxed.

i.e. (£7,000 + insurance + financing + road tax) - £2,950 (41% tax/NIC deducted) = Y

This gives you the cost of you owning a car for the year. Compare this figure to the car benefit of £5512. If the cost of you having your own car is cheaper than the company car then its a clear winner as you're left with something valuable (a 4 year old car to sell) at the end.

So adding together X+Y = total cost to you per year to run a private car.

Compare this to 5512 + 4394

That will give your your savings/additional costs.

There are a couple of other considerations, such as the benefits of the company car are that you don't have to worry about costs when it breaks down - but if you can make significant savings

hope this isn't too confusing to follow!

tarajayne

I just used a tax calculator to work out how much tax he would pay on wages of £50873 and it worked out £788 a month better off than we are now. Surely we could more than run a car on this? So we now need to add up how much running a bigger car cost as we only run my Corsa now.

suso

Are you giving up the medical benefit as well.

At the moment your taxable pay is approx £49852.00
You take the car allowance your taxable pay is £ 44946.00

The difference is £4906.00 @ 40% = 1962 less tax, so a difference of approx 165 per month.

I've worked your taxable pay as follows.
Salary + Car Benefit + Fuel + Medical (total of 56327) minus Personal Allowance of 6475 = £49852

Salary + Car Allowance + Medical (total of 51421) minus Personal Allowance of 6475 = £44946

Out of interest how much tax are you paying each month at the moment, I quickly calculated it to be 1038 per month (not including any national insurance)

tarajayne

£1019 last month, but the figure I can't work out is what his take home pay would be without the fuel? And then to compare what his take home pay would be without the car and fuel but opting for the extra £5k. It seems so confusing, sorry!

And he will keep medical benefit. X