Company Car or Car Allowance

NeverEnough

I'm starting a new job where I have the offer of a Company Car of my choice or a Car Allowance plus mileage allowance (40p per mile) to use my own. I will be in the Higher tax brackets. Would it be more tax efficient to use my own car via the allowance I am being offered or is a Company Car a better idea?

I'd appreciate any info on the pros and cons of both possibilities - thanks!

opinions4u

What's the typical list price of company car that you can get?

How much is the car allownace alternative?

How many business miles do you actually anticipate doing each year (excluding travel between home and primary workplace)?

NeverEnough

1. Car of choice up to around 30K.

2. Alternatively, a 6K annual allowance plus mileage at 40p per mile 1st 10K miles and 25p per mile thereafter.....

3. "Designated office" is my home office. I have to visit numerous sites across the country from the Mid-East to the Mid/ North West regularly.

4. I estimate my business milegae would be around 20K miles a year, may be more or less, just an educated guess at this stage.

Thanks for the input so far - would really appreciate opinions.

anniecave

Do you have a car at the moment? If so do you own it outright? Is it reasonably efficient? Is it reliable?

NeverEnough

Yes I do. Its still on finance, (HP). Its very reliable and I love it, not exactly fuel efficient, but then that isn't the most important issue for me at present and I have no plans to change the car. Its low mileage (30K) and my only concern about using it for work is that it will clock up huge mileage. But I also don't want to be heavily penalised for making the "wrong" choice - I am already going to be in high rate tax bands, I don't need to make it even more if it can be avoided!!!

GRM

If you take the money, you'll get £300 a month take home pay.

If you go for something like a £29k BMW 520dSE, it would cost you £174 a month in tax. A 318dSE would cost you £107 a month. Now it sure wouldn't be my choice for doing 20,000 miles a year but if you see a car as just another business tool, then you could drive a Skoda Octavia for £67 a month in tax.

So;

Company car pros: complete peace of mind, no adverse impact on your own car, no unexepcted bills, business miles over 10k won't potentially cost you money (25p will not cover your costs if as you say it's not fuel efficient)

Company car cons: it'll directly cost you between £360ish and £490ish a month to have one.

Hope that helps with the decision-making process.

I take the cash. My car is nearing its end-of-life so I don't mind putting even more miles on it. When it comes to replacement time, I'll reconsider my options.

ilovebanksMCMLXXXI

Chances are there won't be much in it financially; have done a lot of calculations for customers lately and there's rarely much to choose between the two.

With a company car it becomes a lot easier; no insurance to sort etc etc

NeverEnough

Many thanks for the replies. I suppose the savings on insurance etc will really only be so if I get rid of my private car altogether, otherwise it still needs to be taxed and insured. I want to keep my own car regardless of whether I have a company car or not. I suppose I can see how it goes for a month or two first and then make a decision, as we will have to get rid of one of our cars if I get a company car, to make space to park it!!. I just don't want to have to add to my already considerable tax burden by making the wrong decision, and I couldn't travel the long distances I have to do using a tiny basic car as I'd be too frazzled and exhausted to do the job properly

inmypocketnottheirs

I'd go for the allowance and the mileage.

KPR11

NeverEnough wrote: »

we will have to get rid of one of our cars if I get a company car

No one seems to have mentioned the fact that you will have fuel benefit for private use as well unless you pay it back in full... this will bean extra £150 to £250 pm or more depending on the emissions and whether its petrol or diesel

LongTermLurker

KPR11 wrote: »

No one seems to have mentioned the fact that you will have fuel benefit for private use as well unless you pay it back in full... this will bean extra £150 to £250 pm or more depending on the emissions and whether its petrol or diesel

Don't recall OP saying his fuel would be payed for? His 2 choices are company car (which he will have to fill up and claim back mileage on expenses - he hasn't mentioned how much they pay for business mileage in company car) or private car (which he will have to fill up and he just gets HMRC's 2-tier "use of own vehicle for business usage" allowance).

I've never seen a company offer the full HMRC allowance - that's good. Personally I'm happy to have a car allowance rather than company car - I have almost free choice of model and spec.

The main benefit of the company car is it's the easy life - no servicing, no tax, no insurance, no repairs, no new tyres... But none of that actually means anything is you have another car that you drive, because you'll have to pay for all those things anyway.

I would go for the allowance, drive and enjoy your car to the max and know that over the usual 3-4 year period they will be paying £18 - £24k towards it and its depreciation.

And don't forget that even these days, you won't pay 40ppm for fuel, or even 24ppm - the difference adds to your income. So let's say fuel really costs 15ppm (it'll be roughly right) and you do 20000 business miles:

40p - 15p = 25p
25p x 10000 = £2500

25p - 15p = 10p
10p x 10000 = £1000

Annual "allowance" over and above the price you pay for petrol = £9500 or £38000 over 4 years - your car will wear out quicker cos you're driving it more; it won't be worth as much when you sell it and you'll pay more in tyres/servicing/etc, but it won't come anywhere near £9500 a year.