Company Car.. Cash or Car advice..

benbfc

Hi all,

Quick question, have the choice of opting in or out of my new employers company car scheme.

Monthly allowance is £290 ish. Currently run a small fiat.

(1st question is how much is that worth in my pocket after tax? I guess 200 ish)

So i either;

Take company car say.. New Fiesta @ £260 pm + Tax of £30 = £290. So the cost over say 3years is £10,440.
But I can cash in my present car for £2,500
So total cost is £7940

Pros - No hassle, no hidden costs etc.
Cons - 48 months.


Or

I take the cash which leaves me with £200 ish a month. Trade in on my present car is £2500 ish so to get a 1 year old Fiesta or similar I would need £7,000 cash (which I have).

This would get me a frugal ish car possibly in the £35 tax bracket (i20 or new punto evo maybe) which is well within a warrenty.

Over 3 years (before trade in)
Cost £7000
36 Months insurance (26yr old)= £3000
3 Services £360
1 MOT £150
Sum for repairs outside warrenty £300.
Cost - 10,810
Sell Car for £4,000

Cost 6,810

Have I worked this out correctly, is there anything else I should look at?

On that basis it would appear cheaper to take the cash although I would not be driving as nice a car!

Advice please!

Regards
Ben

Lum

Will you be doing any business mileage in this car and if so how much do they pay you per mile?

Can you take the allowance and keep the existing Fiat?

benbfc

Yes I can take the money and keep the fiat. (What I am doing at present). Just 'concerned' on the heavy rate of tax on it as I assume the 290 allowance is probably 200 after tax. Where as I could be spending the 'whole' 290 on a car.

I do 10,000 miles a year, 1/2 and 1/2 and get 13p a mile.

Lum

Ok, so...
5,000 business miles @ 13p/mile = £650
Car allowance = £290
Total employer contributions to your business mikeage: £940

HMRC recommend 40p/mile for the first 10,000 business miles, above this threshold you will pay tax. That means you can earn up to £2000 in car payments before you need to start paying tax on it.

In addition you can claim tax relief of the £1060 that your employer are not paying you for your business miles.


In order to do this you will need to ensure

a) That your car allowance is going on as a car payment and not as additional wages, and that 20% is not being deducted under PAYE
b) That you keep accurate records of every business trip you do, at a minimum you need start and end locations, date and miles driven.

HMRC only need to see the total business miles driven and the total car payments received but you'll need the proper records on the off chance they decide to check further.

glasgowsoundman

The HMRC website:
http://www.hmrc.gov.uk/cars/
Gives info on company car tax, with guidance for employees here:
http://www.hmrc.gov.uk/cars/employee-guidance.htm
Company car tax is worked out as a percentage of the list price (not the price paid by the company). I think you've missed that out of your calculations.
The staff members on the site that I work at, that qualify for a car, usually take the money as it works out better for them.

benbfc

Lum,

Thanks for the clarification on the tax. The 2 stipulations can be/are met regularly anyway so that wont be a problem.

But which is the best use of money!...

Glasgow - The £30 a month is the Car Tax you refer to at a rate of 20%.

I would say if I was older and the insurance was cheaper on a newer car that would be correct. At 26 though and with £1,000 for insuring something like a new punto evo its a real close run thing..

Lum

If the pricing is close then go for the company car just to avoid the hassle of any unexpected bills and the financial losses that you will suffer in the event of an accident (even a non fault one)

Some insurance companies allow you to use company car time in lieu of No Claims, so for a youngster it's a great way to build up a bit of NCB without paying crippling insurance rates.

oscarward

I have the same deal, the lump sum is treated as income so I pay tax on it (at 40%!).

Looking at the cars available (Lex leasing) means a fairly standard Astra Diesil would work out at about £400 a month then I would pay car tax on that. OK the £400 includes insurance/tax/servicing etc so there would be no hassle to me at all. Also if you can get a fuel card then it could work well as you are future proofed on fuel costs just paying a known amount in tax.

I choose to buy my own car (I run a Jag) and pay all the running costs. I only get 13p a mile when on business but reclaim the difference up to 40p from HMRC at year end. In fact after a few years of claiming they preload my tax code so it works out fairly even at year end.

The big difference between me and the OP is that my insurance is low as I have 10 yrs NCB. If the OP is paying a lot for insurance then it makes sense to have a company car, if for whatever reason I lost my NCB, then it would I would take a company lease car.

Another thought in these times,if redundancies are threatened, is if you have a lease car and are considered for redundancy then the company will need to continue or buy out the lease (in a big company it might not be a consideration as a car can be redeployed). It might make the difference if 2 or more people are being considered and the one person will cost more, then it might sway the decision.

benbfc

Thanks guys. some food for thought there!

lorton

Hi everyone..

I hope we have some tax experts availabe haha..

I have a company car at the moment and considering taking the fuel option on the car which I have previously opted out. However, I cannot accuratly figure how much it will cost me..

I currently earn £36556, with a tax code currently of 197L (includes BUPA etc, company car etc).

New Car is a Golf tdi 1.9 CO2 approx 125. If I take the fule option will it simply be a case that my tax allowance will be reduced etc?? IF so how much?

Any assistance would be appreciated

thanks

marlot

lorton wrote: »

Hi everyone..

I hope we have some tax experts availabe haha..

I have a company car at the moment and considering taking the fuel option on the car which I have previously opted out. However, I cannot accuratly figure how much it will cost me..

I currently earn £36556, with a tax code currently of 197L (includes BUPA etc, company car etc).

New Car is a Golf tdi 1.9 CO2 approx 125. If I take the fule option will it simply be a case that my tax allowance will be reduced etc?? IF so how much?

Any assistance would be appreciated

thanks

http://www.hmrc.gov.uk/calcs/cars.htm

http://cccfcalculator.hmrc.gov.uk/CCF0.aspx