Car allowance - Calling all tax guru's and petrol heads !!

20vt-rs

Guys and gals – I’m after some advice regarding coming out of my current company car scheme and possibly some input from any car nutters/guru’s on what to think about next!

I currently have a fully expensed (excluding personal mileage) company car with a fuel card. Monthly my personal fuel is deducted at a “pence per mile” rate from salary and I pay the usual tax @ 20% which is around £68 per month. The company has made a decision and is moving us out of co-cars onto an allowance, but I am really struggling to work out what is the best option for me to go to with regard to engine size and fuel type…

Allowance details:
The allowance they will give is £4700 per annum, this gets paid into my salary and is taxable – It’s worth noting that the £4700 increase will tip me into the 40% tax bracket, I’m not sure this is a good or bad thing??!

Mileage rates the company pay are as follows:
Petrol – Up to 2ltr 15p/pm and over 2ltr 21p/pm
Diesel – Up to 2ltr 12p/pm and over 2ltr 15p/pm

I travel approx 18k business and 5k personal per year.

I have worked out the following minimum MPG figures need to be achieved based on current fuel prices (approx) to break even:
49mpg or more in up to 2ltr diesel
40mpg or more in over a 2ltr diesel
38mpg or more in up to a 2ltr petrol
28mpg or more in over a 2ltr petrol

Based on the pence per mile rates, the under 2ltr brackets don’t appeal much and the over 2ltr petrol rate is pretty good, diesel not so maybe?

I realise that I can claim the tax break back from the taxman every year on the difference to what the company pays me and their guideline rates, this is a yearly re-bate so I have not included this in any of my calculations and see this is a yearly bonus. But based on moving into 40% then this may benefit me in getting more tax break (I think?)

Now, I also have my own car that I use at weekends (yes I am a petrol head) – this doesn’t cost a fortune (about £85 per month to run over the year), but once I get an allowance I will have to insure, tax and service two cars. Therefore in a moneysaving style, I am probably going to sell the toy and get a good fun all-rounder that I can use for work as well as weekend fun. Car wise, I like hot hatches and anything with some go. I would probably spend around £7k on the car, and have thought about one of the VAG 2.0T range such as the Octavia or Leon, and also the Focus ST at 2.5ltr (this is a thirsty one by all accounts though). Any other thoughts on over 2ltr diesels, I’m not really clued up in this area, I know Audi do a 2.5 V6 diesel?

Lastly - Is there anything else I should be thinking about or considering for this – any input on figures, tax, what I need to be aware of appreciated – as well as some car input from you petrol or diesel heads!

Thanks J

spiro

Remember you will need to get class 2 insurance as you will be using it for business, I also think its a differerent class if you carry goods as part of the business use.

20vt-rs

spiro wrote: »

Remember you will need to get class 2 insurance as you will be using it for business, I also think its a differerent class if you carry goods as part of the business use.

Yes - I've already got some quotes on random cars I've thought about and it's not that bad at all... I don't carry goods unless a laptop is considered goods?

Lum

You don't pay 40% tax on your entire salary, just on the last few grand that go over whatever the current threshold currently is.

Those fuel rates are a pretty awful deal once you consider wear and tear on top of fuel. You do 18k business miles a year so that's at least one set of tyres a year, for example.


That said, it amuses me that the least efficient car gets you the best rates. Are there any restrictions on age or appearance? Are there any personal requirements such as size and/or number of doors/seats

There are all kinds of silly cars you could get. BMW 335i? Nissan Skyline GTR?

Silly, but moneysaving: Get a 2 litre car, get it bored out to 2001cc and registered as such with the DVLA. Also convert it to LPG and don't tell them.

20vt-rs

Lum wrote: »

You don't pay 40% tax on your entire salary, just on the last few grand that go over whatever the current threshold currently is.

I wasn't sure if this had an overall impact on the yearly rebate from the taxman? Is that rebate at 40% or 20%?

Lum wrote: »

Those fuel rates are a pretty awful deal once you consider wear and tear on top of fuel. You do 18k business miles a year so that's at least one set of tyres a year, for example.

That said, it amuses me that the least efficient car gets you the best rates. Are there any restrictions on age or appearance? Are there any personal requirements such as size and/or number of doors/seats.

Agree they are not good, and doesn't promote fuel efficiency, however I don't want to be out of pocket for the company and it looks like a bigger engine will give me more back. There is no restriction on age of appearance, but I'm not wanting an old banger or anything! Needs to be practical and fun, i.e hot hatch type.

Lum wrote: »

There are all kinds of silly cars you could get. BMW 335i? Nissan Skyline GTR?

Silly, but moneysaving: Get a 2 litre car, get it bored out to 2001cc and registered as such with the DVLA. Also convert it to LPG and don't tell them.

Thanks for the advice - re-boring sounds like to much work to me...!

sunshinetours

Are you sure you will be in 40% bracket as your current company and fuel benefits will come off your total income for tax. BAsically your new salary including car allowance would need to be £43875 or more

The other tax issue is that your national insurance goes down to 1% on earnings over £844 per week from 11%.

So your "tax" rate will jump from 31% to 41% not 20% to 40% as you may be thinking

Car wise for £7k and doing 20k+ miles a year I am not really sure what to suggest. Something Japanese maybe for reliability but anything with a good history and good mpg and reasonable insurance and road tax costs (therefore low CO emmsissions so maybe diesel)

Your mileage rates supplied seem a little stingy but they are giving you nearly £5k pa extra to cover cost of buying, depreciation insurance and servicing so I think you should be ahead of the game providing you buy sensibly

Beckyy

So definitely not the petrol head car but I have a 03 reg 1.4 Ford Fiesta. 5 doors, Diesel. Motorway driving I can get about 600 miles from a tank, which costs about £40, maybe £45 now, to fill up. My tax is £30 a year, insurance is cheap, Ford are pretty cheap for parts etc. Why not get something like that for the work side of things and get yourself something nicer for weekends? I know it's a bit boring, but it's so cheap. The car itself cost me £2995, and that was 15K miles ago so you can probably get one for about 2 grand with a decent milage. 18K miles in something like that would probably cost about half of your fuel allowance, maybe slightly more, meaning you have an extra grand or so to put into your weekend car.

bigjl

I believe some C Class diesel Mercs have an engine just over the 2.0 litre mark, somebody told me that the Merc BlueEFFICIENCY C200 engine is a 2.143cc with the C220 BlueEFF having the same engine but slightly more power.

Fuel consumption
43.5 mpg Urban
68.0 mpg Extra Urban
56.6 mpg Combined
Co2 130 g/km

They are around the £25k mark with a manual gearbox.

Actually the C220 B E is more economical and has better Co2

45.6 mpg Urban
70.6 mpg Extra Urban
58.9 mpg Combined
Co2 127 g/km

15ppm at nigh on 60mpg isn't that bad.

Not sure if your allowance is enough but hey worth a try.


Though if you like Hot Hatches and like the Skoda Octavia then why not look at a Vrs with the 170bhp diesel engine, have used one for response work in Southampton and they go like stink.

You can also get them chipped to around 200bhp.

sunshinetours

bigjl wrote: »

I believe some C Class diesel Mercs have an engine just over the 2.0 litre mark, somebody told me that the Merc BlueEFFICIENCY C200 engine is a 2.143cc with the C220 BlueEFF having the same engine but slightly more power.

Fuel consumption
43.5 mpg Urban
68.0 mpg Extra Urban
56.6 mpg Combined
Co2 130 g/km

They are around the £25k mark with a manual gearbox.

Actually the C220 B E is more economical and has better Co2

45.6 mpg Urban
70.6 mpg Extra Urban
58.9 mpg Combined
Co2 127 g/km

15ppm at nigh on 60mpg isn't that bad.

Not sure if your allowance is enough but hey worth a try.


Though if you like Hot Hatches and like the Skoda Octavia then why not look at a Vrs with the 170bhp diesel engine, have used one for response work in Southampton and they go like stink.

You can also get them chipped to around 200bhp.

They are looking to spend £7k !!

bigjl

sunshinetours wrote: »

They are looking to spend £7k !!

I thought he had an allowance of £4700 a year to lease or buy a car?

sunshinetours

bigjl wrote: »

I thought he had an allowance of £4700 a year to lease or buy a car?

They do have a car allowance but they did say in first post

20vt-rs wrote: »

..... Car wise, I like hot hatches and anything with some go. I would probably spend around £7k on the car, and have thought about one of the VAG 2.0T range such as the Octavia or Leon, and also the Focus ST at 2.5ltr (this is a thirsty one by all accounts though). Any other thoughts on over 2ltr diesels, I’m not really clued up in this area, I know Audi do a 2.5 V6 diesel?

The car allowance is being used I guess towards the running costs etc. They will be getting around £230 a month net on the car allowance of which in guess a chunk will be servicing, repairs, insurance and road tax