Confused about Company Car - bit different

justpounds

I’m well confused despite reading lots on line it very daunting

Basically my situation is this, I’m going to be the first person at my small company that has a car allowance or a company car.

I will be doing about 12,000 personal miles a year and the business amount is a little unknown but I would guess at least 15000.

My boss doesn’t fully understand what’s financially better for the company and trying to find this out whilst I look into what’s better for me.

He has muted a car allowance of between 350 – 450 and I’ve kind of said it needs to be near the 450 as I won’t get much of a loan after tax for 350.

He has today said that maybe we should look at a company car with lower Co2 which may be better for both of us, but I think the lowest c02 emmission band will not give me the kind of size car I need for travelling and down the country and I higher band will mean that I pay too much tax.

My basic is is the lower tax bracket but with commission and the BIK added in it is extremely likely I will go into the 40% bracket.

I really want an estate car which the boss is agreeable too.

I need to be on the ball otherwise this may get waited more in the company favour than mine –

I guess I need to understand the cost from both mine and the companies point of view - any advice?

cebegebe

Hi,

I'm looking at the same thing at the moment.

You can do a salary sacrifice type of arrangement where the company deducts the money from your salary before it is paid to you and pays for the car on your behalf - therefore you don't need to pay tax and NI on it(and neither do they).

If you're a lower rate tax payer your will pay 20% of the value of the car, which you then multiply by the CO2 band to get the Benefit in Kind tax.

I'm looking at something like a BMW 320d efficient dynamics, it has a 2.0 litre diesel engine but only 109g/km CO2 emissions, so the lower tax will offset the higher cost. Tax per month is about 66/month.

Hope this helps.
Cbgb

jennifernil

Is your employer going to pay you the full 40/25 pence per mile for business use if you take the allowance and buy your own car?

And if you take a company car, how will business and private fuel costs be treated?

The answer to those questions will make a big difference to the calculations.

justpounds

Not sure I understand the salary sacrifice bit..

With regards to payment per mile, I dont think I would get paid full 25 / 40p, more like 11p.

On private mileage I would not be getting payment for those.

Thanks for your responses.

Just

jennifernil

If using your own vehicle, the 40/25ppm is intended to help cover your costs such as servicing, insurance, tyres, depreciation, as well as fuel. 11ppm wil not even cover the fuel, so this is not that great a deal IMHO.

You will of course be able to claim tax relief up to the full amount. So if you do 15000 business miles you could claim.....

10000 @ 40p = £4000
5000 @ 25p = £1250
less
15000 @ 11p = £1650 = £3600

at your top rate of 40% = tax relief of £1440

effectively giving you £3090 towards your costs, over and above your taxed car allowance.

If you stay in the 20% band then that of course reduces to £720 tax relief and a total of £2370.

It is not an easy calculation to compare the alternatives.

IMHO the main advantage of taking the allowance is that you can choose the car YOU want.

pie2727

Hi.
If I use a fuel card which work provide me and also take a cash allowance each month to fund my own car - can I still claim the 40p allowance back?
I cover c40k miles a year and work pays 11p per mile...
Thanks

jennifernil

I am not really up on fuel cards. Does having one not mean your employer pays all your fuel? If so, is that not a taxable benefit as they pay your private fuel too?

You then say they are paying 11ppm, so I am confused!

Can you provide a bit more information?