Company's car - Help needed

giruzz

Hello Guys,

I will be joining a new company next week and I just received a list of the cars currently available....tu cut a long story short:

1) I need to pick one of the cars
2) My monthly allowance is 400GBP
3) I would like to pay the less possible amount (e.g. taxes and picking a car over the allowance)

Monthly cost BIK
£303.50 £2,822.40
£336.41 £3,516.70
£376.61 £4,852.97
£486.72 £2,427.41
£529.67 £4,920.86
£571.54 £7,208.45

From my understanding...the two most efficient choices are the two in the middle... (or the first?)

Given that the first has a lower monthly cost than my allowance, am I entitled to a refund (in Cash)?

The second one has a monthly cost higher than the allowance...does it mean that the difference will be taken from my salary?

How do I determine the monthly cost in taxes given the BIK? (I'm a 20% tax band? What if I was a 40% taxpayer?

I really hope that someone could explain me how this thing is going to work...thanks,

giruzz

Gertie_Walker

First of all, the £400 monthly allwoance is something between you and your employer. I dont think they would pay you the difference between the cost of the car and the £400 (but I guess you could ask). You would be taxed at your highest rate on the BIK. Therefore, where the benefit is £2822, the cost to you is £564.40 if you are a 20% taxpayer and double that if you are a 40% taxpayer.

giruzz

Gertie_Walker wrote: »

First of all, the £400 monthly allwoance is something between you and your employer. I dont think they would pay you the difference between the cost of the car and the £400 (but I guess you could ask). You would be taxed at your highest rate on the BIK. Therefore, where the benefit is £2822, the cost to you is £564.40 if you are a 20% taxpayer and double that if you are a 40% taxpayer.

Thanks for the answer...it make sense..just one last question. Will I get taxed on the allowance as well? (I have tried to reach my new employer and I have spoken with 4 different people and all said 'not me' speak to another dep)

giruzz

Gertie_Walker

If your employer is paying you an allowance of £400 pm, then this is taxable along with your pay. From your question, I assumed they were allowing you to choose a car which wouldnt cost them more than £400 pm.

Bean_Counter

Gertie_Walker wrote: »

From your question, I assumed they were allowing you to choose a car which wouldnt cost them more than £400 pm.

That was my reading of it as well.

OP, what is the situation regarding fuel? Is the employer providing you with private fuel? How do they reimburse you for your business miles?

GRM

giruzz wrote: »

Monthly cost BIK
£303.50 £2,822.40
£336.41 £3,516.70
£376.61 £4,852.97
£486.72 £2,427.41
£529.67 £4,920.86
£571.54 £7,208.45

From my understanding...the two most efficient choices are the two in the middle... (or the first?)

The first on the list will result in the lowest tax bill for yourself:
2822.40 / 12 = 235.20.

235.20 * 20% = £47.04. This is the total amount of tax you'll pay each month for the benefit of being given the use of the car.

The £376.61 car would cost you £80.88 per month in tax. Is it worth £33 a month to you to be in that (presumably nicer/more expensive) car rather than the one at the top of the list?

EDIT: to correct my mistake re: BIK.

Bean_Counter

GRM wrote: »

235.20 + 303.50 = 538.70

We need more info from the OP, but I read it that the £303.50 is the cost to the company of the car and hence does not form part of the benefit in kind charge.

GRM

Bean_Counter wrote: »

We need more info from the OP, but I read it that the £303.50 is the cost to the company of the car and hence does not form part of the benefit in kind charge.

True. My mistake. I opted out of car schemes when they introduced CO2 based BIK charging.

dori2o

Is it not possible to negotiate with the company on the £400 car cost. If you could negotiate an increase in the monthly cost to equal the 2nd highlighted car you would then have the lowest car tax liability possible from that list.

opinions4u

When working out your benefit in kind, look a couple of tax years down the line. Some with CO2 outputs between 100 and 119 are going to get clobbered for a 40% increase thanks to Darling's last budget.

99 or less is the way to go to save tax ... but don't expect to be overtaking in the fast lane with a car like that!