Company (Leased) Car - Confused About Income Tax !!!

st0610

Hi there ...

I was wondering if anyone could help me ... I'm totally confused about how much extra income tax I pay for the benefit of having a car via work !!!

I work for the NHS in Scotland ... I'm a Community Nurse who averages 3500-4500 business miles per year ... Our Health Service offers car leasing, with a huge range of cars available ... I currently drive a Peugeot 308cc 150THP GT with an OTR list price just shy of £25K and emissions of 177. Deducted from my monthly salary is the 'leasing' cost, for which I pay £215 per month ... this includes road tax, handling charge, insurance etc (basically I think of this as the cost to me for having the car for private use) ...

My tax code has jumped around in the last 2 years (now at 0338L) ...

I've looked at various websites about the amount of extra income tax incurred, but to be honest, they all say different things ...

I'm now considering a new vehicle (under my NHS employer leasing scheme) and want to know how my income tax will actually be calculated ... I realise that I do currently drive a top-of-the-range car (which some might even consider luxurious) and want to avoid this next time round ... (Thinking FIAT 500 or Punto - with extras !!!) ...

Can anyone help me do these calculations ... at the end of the day I want to pay as little extra income tax as possible (without going for a hybrid etc) ...

By the way the NHS pays me 14p per mile for business miles claimed (around 300-400 per month) ...

Any help/advice much appreciated ...

Cheers.

Hintza

There will be better qualified folk along shortly but from what you say:-

You pay the lease charges (£215/month) if that is the case then you shouldn't be paying any tax since the payments are being deducted at source.

You also get paid 14p/mile but you are allowed to claim 40p/mile (need to check this figure) for business use. So you should be claiming the difference.

I hope I have got the right end of the stick.

JQ.

Always good to see the Public Sector avoiding tax.

I presume this system is put in place so that the Employees avoid the tax payable on a Company Car and also avoid the income tax payable on a car allowance. I don't see that you're paying any income tax for the car as you're not receiving any income - what they are actually doing is leasing a car to you at a heavily discounted rate. The cost of you actually leasing and insuring that car should be circa £550pcm. So you're receiving a benefit in kind of circa £335pcm - does that get taxed?

As you can guess I'm not expert on this, so I may be totally wrong, but it does look like tax avoidance to me - by your employer, not you. If you do pay tax on the benefit in kind then fair enough.

Hintza

JQ personally I think you are quite high on your monthly pricing. With a bit of volume I doubt this is really subsidised. It might be a little cheap but I certainly wouldn't pay £500/month for that car.

But your point is valid and the OP does need to check whethr the trust is making up the payments.

JQ.

According to Lings Cars, considered to be one of the cheaper leasing brokers, that car costs £500pcm, add onto that the cost of insurance and any other non service items and £550pcm is about right. I agree there's no way I'd pay £550pcm for that car, much better one's out there at that price point - I guess the value depreciates like a stone which increases the lease cost. But at £215pcm all-in it looks very attractive.

alleycat`

It appears in your case there are two costs.

The first cost is the lease value you are paying (for your own private usage).

The second cost is the amount of "tax free allowance" you are sacrificing from your salary to have this vehicle.

Your basic tax free allowance code is normally 647L (representing the first £6,475 of your annual salary that is "untaxed")

Having a code of 338L means you have in essence given up approx. £3,000 of this tax free allowance.

If you want to reduce both values at your next car renewal then you should be looking for a car that you like / meets your needs and that has the lowest possible CO2 value and lowest possible list price (for tax purposes) and the lowest possible lease cost (for personal usage purposes).

Sometimes the above two points can be mutually exclusive.

Cheap / low CO2 cars sometimes have higher leasing costs as they depreciate faster.
The amount of private / total mileage you do will also influence the total lease cost.

You might also find (depending on how your fuel is re-reimbursed) that a more fuel efficient car puts more money in your pocket in the pence per mile (v's actual fuel used) stakes.

My advice would be not to make the mistake of getting a car you hate just to save a few quid in tax.
However, imho you can get a much nicer car than what you have for less money than you are paying in both tax and lease value.

st0610

Hi All ...

Many thanks to all who took the time to reply ... much appreciated.

I'm not sure what actual amount the NHS 'make up' in the leasing cost, but I can confirm that they do inform the Inland Revnue of all information, hence the reason my tax code changes and my 'tax free' benefit is lower ...

I'm now considering a FIAT 500 or FIAT Punto, since based on the leasing price (to me as an employee) these are respectively low (around £90 for a 1.2 500 Sport and £140 for a 1.3 Punto M/Air Sporting per month) ... both emissions seem reasonable for performance/fuel economy etc ... just that the 500 may be a bit small, but it's only for city driving 90% of the time, and no family !!!

Lots to consider, but it does irrtate me that my employers are able to provide me with what the leasing will cost me (deducted directly from my monthly salary), though can't seem to advise about what the 'additional' cost in income tax is ...

The expenses cost of 14p per mile seems to be a standrard that we all (NHS employees) sign up for when taking the lease option ... (If you use your 'own' car, expenses rise to normal 40p per mile ...

Any further thoughts appreciated ...

Cheers again ... :think:

ilovebanksMCMLXXXI

Hi

If this was a 100% 'normal' company car arrangement you wouldn't be paying the lease; you would instead be paying Benefit in Kind (BIK) which on the vehicle you've detailed would certainly be less than £100 pcm.

The alternative to a company car is to opt-out and receive a Car Allowance (this is extra money paid with your salary to cover a vehicle).

From what you have described, you are doing neither are actually paying for the lease yourself using cars offered through NHS leasing schemes.

On that basis, it is a personal lease and shouldn't attract additional tax.

You should also be able to charge the NHS/your employer 40p/mile for the mileage you do for work (you can charge 40p/mile for the first 10,000 per annum and 25p/mile thereafter).

I would read your employment and car contract terms and conditions because (on the face of things) I would suggest something is amiss - you seem to experiencing a mixture of BIK, opting-out and personal lease and that shouldn't be the case.

Best of luck