Company Car Vs Car Allowance

ian21

Apologies in advance to bring this issue up again - I have trawled through loads of older threads to see if my query is answered but I still can't make head nor tail of it!

So, I'm about to start a new job and have the option of taking either a company car or a car allowance.

Details are as follows;

Salary: £45000
Car Allowance: £480 per month or a car to the value of £27k.

To further complicate matters I'm about to move house and wouldn't want to have to finance a new car (it would limit the size of mortgage available to me) so I'm leaning heavily towards taking the car even though it will impact take home pay.

The model they have offerred me (the company currently have a surplus) an Audi A3 2.0tdi which has a CO2 rating of 154 and a purchase price of £23912 if I was to take it.

Can anyone out there help me to identify what my take home salary would be with the car allowance Vs what it would be if I took the Audi instead?

That way I can decide for sure.

Thanks in advance for your help.

cosyc

Go to http://cccfcalculator.hmrc.gov.uk/CCF0.aspx


From HMRC calculator, if you do not receive any fuel for private miles then it says
According to the details you have provided, the results are:

Car benefit charge (2010/2011) £5,260.00

Car fuel benefit charge (2010/2011) £0.00


In order to calculate the tax due on company car benefit and company car fuel benefit, the amounts calculated above need to be applied to an employee's other income and tax information.


Without additional information it is not possible to give the actual amounts of tax liability, however the following examples provide an indication of the tax that would be due if the full amount(s) of benefit are charged at the basic (20%) and higher (40%) rates only:


Tax Liability indicator: 40%

Company Car Tax (2010/2011) £2,104.00

Company Car Fuel Tax (2010/2011) £0.00

So basically your salary would have extra tax deducted of approx £2104 divide by 12 = £175

Whereas a car allowance is going to be £480 pcm less tax at 40% and NIC at 1% = £283 Extra pay to buy, insure, road tax and service.

website http://www.cashorcar.co.uk/ will add in factor of car purchase and amount per mile you will receive from your employer.

caeler

Aside from the tax point of view, consider when the lease runs out on the car you will be given and if you will be given a choice if car upon renewal. Also with a company car comes piece of mind IMHO, no servicing worries just book appointment and take it in and not having to pay the bill, no having to find £250 for 2 replacement tyres, etc

caeler

Also the car allowance is very generous, it might be worth looking into a leasing deal, £5K+ should get you something decent and on your terms and you still don't have any worry over servicing, etc. You can then also claim tax relief on the mileage you claim. (Search for p87)

cosyc

bluefuzzybug wrote: »

Aside from the tax point of view, consider when the lease runs out on the car you will be given and if you will be given a choice if car upon renewal. Also with a company car comes piece of mind IMHO, no servicing worries just book appointment and take it in and not having to pay the bill, no having to find £250 for 2 replacement tyres, etc

Depending on your job and miles, expect big wear and tear on the car, and if you buy it the extra miles will mean big depreciation and if you lease then go over the agree miles and it will cost. One of my husbands colleagues is at 12p per mile over 75000 on a three year contract.

ian21

cosyc wrote: »

Go to http://cccfcalculator.hmrc.gov.uk/CCF0.aspx


From HMRC calculator, if you do not receive any fuel for private miles then it says
According to the details you have provided, the results are:

Car benefit charge (2010/2011) £5,260.00

Car fuel benefit charge (2010/2011) £0.00


In order to calculate the tax due on company car benefit and company car fuel benefit, the amounts calculated above need to be applied to an employee's other income and tax information.


Without additional information it is not possible to give the actual amounts of tax liability, however the following examples provide an indication of the tax that would be due if the full amount(s) of benefit are charged at the basic (20%) and higher (40%) rates only:


Tax Liability indicator: 40%

Company Car Tax (2010/2011) £2,104.00

Company Car Fuel Tax (2010/2011) £0.00

So basically your salary would have extra tax deducted of approx £2104 divide by 12 = £175

Whereas a car allowance is going to be £480 pcm less tax at 40% and NIC at 1% = £283 Extra pay to buy, insure, road tax and service.

website http://www.cashorcar.co.uk/ will add in factor of car purchase and amount per mile you will receive from your employer.

Thanks to you all for the quick responses.

Cosyc.............Am I correct in thinking the actual cost to me then is the loss of the £283 nett allowance and the additional tax of £175 meaning I'd effectively be £458 down per month but I'd have the benefit of not having to worry about funding and running a car?

Have I followed you correctly or does the Car benefit charge (2010/2011) £5,260.00 need to be factored in somewhere too?

Sorry - a bit puzzled by all of this...........

Thanks to you all again.

ian21

bluefuzzybug wrote: »

Aside from the tax point of view, consider when the lease runs out on the car you will be given and if you will be given a choice if car upon renewal. Also with a company car comes piece of mind IMHO, no servicing worries just book appointment and take it in and not having to pay the bill, no having to find £250 for 2 replacement tyres, etc

Thanks BFB - yes I would be given a choice of car upon renewal.

The peace of mind is a big thing to be honest and my preference is not to have to worry about racking up miles on a private car. That said, if it's terribly tax inefficient then I'd obviously plump for the allowance and buy a second car.

Thanks again.

zygurat789

ian21 wrote: »

Thanks to you all for the quick responses.

Cosyc.............Am I correct in thinking the actual cost to me then is the loss of the £283 nett allowance and the additional tax of £175 meaning I'd effectively be £458 down per month but I'd have the benefit of not having to worry about funding and running a car?

Have I followed you correctly or does the Car benefit charge (2010/2011) £5,260.00 need to be factored in somewhere too?

Sorry - a bit puzzled by all of this...........

Thanks to you all again.

The car benefit charge is a notional increase in salary on which you will be taxed at your highest rate because your employer is providing you with a benefit instead of salary. Beware it is not necessarilly £5260. This has been calcukated on the list price you gave whereas the charge will be calculated on the list price the day before the first registration of the vehicle. Also if you have so much as one litre of fuel for private use provided by your employer ther will be a further hefty fuel benefit charge.

ian21

zygurat789 wrote: »

The car benefit charge is a notional increase in salary on which you will be taxed at your highest rate because your employer is providing you with a benefit instead of salary. Beware it is not necessarilly £5260. This has been calcukated on the list price you gave whereas the charge will be calculated on the list price the day before the first registration of the vehicle. Also if you have so much as one litre of fuel for private use provided by your employer ther will be a further hefty fuel benefit charge.

Thanks Zygurat - I won't be using the car at all for personal use as we already have one for that.

I will be doing 20000 business miles per annum roughly which is what is putting me off buying a private car and taking the allowance, also puts me off privately leasing a car.

Sorry for being a bit thick here but I still don't understand the car benefit charge - does that mean there is a charge of approximately £5260 on top of the extra £175 tax that would be payable?

Also, what additional information would I need to give someone to be able to quickly work out what this would mean in terms of take home pay with and without car?

Thanks again all - appreciate your patience.:)

cosyc

Personal use also includes home to work normal commuting.

What happens is they reduce your tax code by 5260 (car benefit), which means you have less tax free pay so in effect pay more tax. So £175 pcm tax mean £175 less in your pay packet. That is how the tax man gets the tax money back on your compnay car.

So personal allowance 6475 - 5260 = 1215 so tax code 121

gross pay 45000 - 1215 = 43785 taxable pay.
tax up to 37400 at 20% = 7480 and balance (43785 - 37400) £6385 at 40 % = 2554
so total tax for 2010-11 approx 7480 + 2554 = £10034

Gross pay 45000 less tax 10034 less national ins 1200 = £33766 net pay


If you take the car allownace of £480 it will have tax and national insuracne taken off this so the net amount will be £283. So you will get

45000 + 5760 (480 x 12) = 50760.
tax = 50760 less personal 6475 = 44285 taxable pay

tax up to 37400 at 20% = 7480 and balance (44285 - 37400) £6885 at 40 % = 2754
so total tax for 2010-11 approx 7480 + 2754 = £10234
Gross pay 50760 less tax 10234 less national ins 1250 = £39276 net pay

so with company car net pay pcm £2813
with car allownace net pay pcm £3273

Perhaps someone can check these figures.

ian21

cosyc wrote: »

Personal use also includes home to work normal commuting.

What happens is they reduce your tax code by 5260 (car benefit), which means you have less tax free pay so in effect pay more tax. So £175 pcm tax mean £175 less in your pay packet. That is how the tax man gets the tax money back on your compnay car.

So personal allowance 6475 - 5260 = 1215 so tax code 121

gross pay 45000 - 1215 = 43785 taxable pay.
tax up to 37400 at 20% = 7480 and balance (43785 - 37400) £6385 at 40 % = 2554
so total tax for 2010-11 approx 7480 + 2554 = £10034

Gross pay 45000 less tax 10034 less national ins 1200 = £33766 net pay


If you take the car allownace of £480 it will have tax and national insuracne taken off this so the net amount will be £283. So you will get

45000 + 5760 (480 x 12) = 50760.
tax = 50760 less personal 6475 = 44285 taxable pay

tax up to 37400 at 20% = 7480 and balance (44285 - 37400) £6885 at 40 % = 2754
so total tax for 2010-11 approx 7480 + 2754 = £10234
Gross pay 50760 less tax 10234 less national ins 1250 = £39276 net pay

so with company car net pay pcm £2813
with car allownace net pay pcm £3273

Perhaps someone can check these figures.

Cosyc..........Thanks for taking the time to assist here.

That's exactly what I was hoping for - somebody else to break down the figures to be able to make the call on car or not.

Only issue is - I've got a very different set of figures than yours.

I used an online nett pay calculator which came up with;-

Monthly Take Home of £2738.37 based on an annual salary of £45k.

Obviously this would need to have the company car tax taken off (I then took off £175 per month) based upon your earlier posts giving me a take home of:

£2563

Can anyone indicate which would be the correct set of figures (I'm sure it will be Cosyc and I hope that's the case too!).

Thanks again - very much appreciated.