Company car Vs Cash allowance

GJUK_2

Hello,

I'm new to this site and I'm afraid I'm going to ask a question, which, I expect has been asked a lot on here. I've read and searched for topics on company cars and cash on here, read and digested them. However I want to confirm some things with the 'experts' (you lot!!) if I may.

Please bear with my lengthy post, I thank anyone who gives me their time in trying to assit me.

I currently work in IT, full time employment.
I earn £23,000 a year, falling in to the 20% tax bracket.

I have a £22,000 58 plate ford mondeo at the moment, which I know I pay tax on, how much however I'm really not sure and I've never found out. People have told me it's around the £600 mark.

I'm looking at 'jumping' out of this and using my car allowance which is £325 per month before tax (if indeed i do get taxed on this?).

I'm lookign at buying a £3,500 volvo T5 to knock about in for a few years.

Cost of car £3,500.
MOT each year £40 assuming nothing breaks.
Tax £190
Insurance £1,100 (thats right! a lot i know, im 25 with two accidents using 2 years NCB)
Service costs £300 a year.
Parts breaking say£500.

Total per year then, £5630 for the first year. Assuming I run the car over two years, £3880, with the car still being worth £1500, or so.

My payments for the car cash option is £325 per month. So - 20% tax (I assume this is the case) this comes to £260. X 12 months this is 3120 per year cash.

My company have advised that i must use a car fuel card with my car, which is fine. But I've read somewhere that I can claim 40p per mile for the first 10,000 miles and 25p there after when using a company car.

One question: Can this be done with a car fuel card?

I expect to do 30,000 a year, 25,000 business miles and 5,000 of my own miles.

So this is where I get stuck. @25,000 business miles. Does this mean I can claim 40p x 10,000 and 25p x 15,000 per year? = £7750 per year! or not?


Other questions:

Do you get taxed on car allowances? Ie £320 = £260 after tax (at 20%?

Could someone please tell me how much I pay tax on the company car at the moment please? The list price is £22,000 new.

Also, assuming I 'give up' this £22k mondeo, I wouldnt pay this tax anymore would I and I don't pay tax on my own car would I?

Thank you for reading this thread, I am sorry if you deal with these questions on a daily basis, the information will really help me and make a massive impact on my decision. Thank you for helping.

Cheers,

Jon

gazfocus

GJUK wrote: »

Hello.....

I'm looking at 'jumping' out of this and using my car allowance which is £325 per month before tax (if indeed i do get taxed on this?).

... But I've read somewhere that I can claim 40p per mile for the first 10,000 miles and 25p there after when using a company car.

I might be wrong here but I would guess that the car allowance would be in place of the 40p per mile, so you either get one or the other (depending on which your company offers).

Therefore, I guess you will claim back your fuel as an expense but it would be receipt based rather than a rate per mile.

Marsie

I will leave the confusing world of company car tax to others, but make sure you are aware of any limitations your company places on age/emissions/fuel type. It may be that you would not be allowed to claim the allowance for the car you are thinking of.

M.

donny-gal

I take it you have read through this page?

The amount of tax depends on the emissions rating and the cost of the car when new, so even if you are given an older company car then you pay the rate as the cost of the car when new.

Unless you do a lot of private mileage, then you are better getting your company to agree to a mileage rate for when you do company miles, than a fuel card. You can only claim mileage for your car if you do not have a fuel card.

An old car doing 30k miles a year is asking for garage bills IMHO.

You do get taxed on a car allowance as part of you salary, as in effect it increase your wages, as you already earn more than the allowance, you would pay 20% on the whole of it, unles it takes your income over the 40% threshold.

When is the Mondeo due for changing, can you change it for a good emissions/smaller engine car?

To be honest, I had a company car when I worked, and it was a real bonus, no worries about breakdowns, tyres, servicing. I think you would need to really need to save the difference to take the risk.
DG

GJUK_2

donny-gal wrote: »

I take it you have read throage?

The amount of tax depends on the emissions rating and the cost of the car when new, so even if you are given an older company car then you pay the rate as the cost of the car when new.

I don't think you've read my post. I don't want an older COMPANY car. I want to buy my own car, and use it in place of my company car.

Unless you do a lot of private mileage, then you are better getting your company to agree to a mileage rate for when you do company miles, than a fuel card. You can only claim mileage for your car if you do not have a fuel card.

I'm not sure about this.

n old car doing 30k miles a year is asking for garage bills IMHO.

I agree, but they're comfy and reliable (Volvo V70)

You do get taxed on a car allowance as part of you salary, as in effect it increase your wages, as you already earn more than the allowance, you would pay 20% on the whole of it, unles it takes your income over the 40% threshold.

When is the Mondeo due for changing, can you change it for a good emissions/smaller engine car?

Why would I want to do that? Again you're talkign about company car's. I have a mondeo company car. I want a private car now. I don't beleive they get taxed on emissions do they? I would have to road tax that car myself.

To be honest, I had a company car when I worked, and it was a real bonus, no worries about breakdowns, tyres, servicing. I think you would need to really need to save the difference to take the risk.
DG

This is true.

Thanks.

Jon

pure_dead_dopey

Hi

Over a long career in sales I've had the benefit of both types. A company car is good, all your stuff is paid for, however you get tanked for tax, particularly if you have a fuel card as the government does not charge you tax on the full you use privately but makes an across the board assumption about how much you use which is very high, it was costing me around £1300 worth of tax per year and as I paid tax at 40% that cost around another £500 in tax. You cannot claim the difference between what the company pays for fuel and the government tax figure of 40p.
If you have a car allowance you are taxed on it at your current rate, your company suggestion sounds a bit low to me, difficult to run a car off that amount. Whatever your company pays on fuel (mine pays 25p per mile) you can then claim the extra 15p (making it up to the 40P) but only on the first 10000, not any of the rest of your mileage, so this is worth to me £1500 per year. Bear in mind you need business car insurance which costs extra and you also need to pay for repairs etc and you need some sort of breakdown cover as you must ensure that your have transport available regardless of breakdowns etc. My company also stipulates that my car must be less than 3 years old so my allowance is £450 per month. Hope this helps

withabix

You CANNOT claim the 40p or the 25p - you can only claim the TAX on that figure.

So, if your company pays (say) 13p per mile for fuel, you can claim back (in your case):

20% of (40p-13p) x 10,000 miles = £540 (ie 5.4p per mile)

and 20% of (25p-13p) thereafter.

BUT you can only claim this on journeys that are not to your permanent place of work.

To be honest, your cash allowance figure is too low compared to the size of company car for it to make sense to swap.

In my case, I get £5500 per year car allowance OR I can have a £23k Insignia.

Plus, I get all my fuel, via a company fuel card. I am taxed on the actual private fuel I use.

You need to factor in breakdowns and servicing and what transport you will use when this happens. You are buying an older out-of-warranty car, so you won't get a manfacturer courtesy car for a breakdown.

I've had two occasions where my car has had serious breakdowns:

1) Ford Galaxy, out of warranty, in garage for FOUR WEEKS - I had to hire a car for four weeks. That isn't cheap!

2) Nissan X-Trail, in warranty, in garage for four weeks - I had a courtesy car. No cost.

If '1)' applies, the economics of running your own car soon disappear...

Your insurance will need to cover Class 1 or Class 2 business use - standard car insurance does not cover you.

pure_dead_dopey

withabix wrote: »

You CANNOT claim the 40p or the 25p - you can only claim the TAX on that figure.

So, if your company pays (say) 13p per mile for fuel, you can claim back (in your case):

20% of (40p-13p) x 10,000 miles = £540 (ie 5.4p per mile)

and 20% of (25p-13p) thereafter.

BUT you can okny claim this on journeys that are not to your permanent place of work.

To be honest, your cash allowance figure is too low compared to the size of company car for it to make sense to swap.

In my case, I get £5500 per year car allowance OR I can have a £23k Insignia.

Plus, I get all my fuel, via a company fuel card. I am taxed on the actual private fuel I use.

You need to factor in breakdowns and servicing and what transport you will use when this happens. You are buying an older out-of-warranty car, so you won't get a manfacturer courtesy car for a breakdown.

I've had two occasions where my car has had serious breakdowns:

1) Ford Galaxy, out of warranty, in garage for FOUR WEEKS - I had to hire a car for four weeks. That isn't cheap!

2) Nissan X-Trail, in warranty, in garage for four weeks - I had a courtesy car. No cost.

If '1)' applies, the economics of running your own car soon disappear...

Your insurance will need to cover Class 1 or Class 2 business use - standard car insurance does not cover you.

Sorry guys, the fight with HM tax dopes took so long I had forgotten how much I actually got back and yes you are right withabix its the tax on 1500, so not a windfall of 1500. Sorry if I misled you guys:o:o

withabix

pure_dead_dopey wrote: »

Whatever your company pays on fuel (mine pays 25p per mile) you can then claim the extra 15p (making it up to the 40P) but only on the first 10000, not any of the rest of your mileage, so this is worth to me £1500 per year.

That's wrong on several counts:

1) You can only claim the TAX back on the difference. On 10,000 miles on your figures, that's either 20% or 40% of 15p per mile - ie £300 (at 20%) or £600 (at 40%). Your tax allowance goes up by the amount you are claiming, but you only benefit by the tax rate.

2) The reason you can't personally claim after 10,000 miles is that your employer is paying you 25p. Tax relief above 10,000 miles is therefore (tax rate%) x (25p minus 25p) = 0.

3) It is worth £300 or £600, not £1500.

withabix

I think you are better off sticking with your company car in your case. You will be financially worse off opting out.

Your employer is likely to have restrictions on the car you can have and its age and mileage.

My employer stipulates the following:

Max CO2: 225g/km (was imposed to limit SUVs and gas guzzlers)
Max age: 5 years
Max mileage: 150,000 miles (we are in a high mileage industry)
Servicing: Must be carried out to manufacturer's spec/frequency.
Number of Seats: 4 adults minimum (prevents most sports cars)
10% less car allowance if petrol engine
Proof of business use insurance must be provided annually.

Jeff77

Whoa, he's not replying anymore. I have a question, where did you get your number 1 withabix? I'm confused because I got another perspective on that. Just want to clarify things.