Business Use Car

amc1

Not sure if this is the right forum....

A change in role and office at work meant I asked for a company car.

I have been offered a business use car.

Being new to world of company cars, can anyone shed any light on this set-up, namely :-

whats the tax situation ie. is it worth it ? how much tax will I pay (I'm just over the 40% threshhold)
will I lose my insurance no-claims (as the company pays the insurance) ?
will my wife be able to drive it ?
any other experiences/advice.

thanks,

JasonLVC

You state you've been offered a 'business use' car but I'm guessing you mean you get a car for business use but can use the car for personal use also?. For business use only then no tax is due as the vehicle is provided solely for business use but requires detailed logs of your mileage, the vehicle being kept at the office usually and is not that common - but as you asked about your partner driving it, I'm assuming you have private use of the vehicle outside of work hours, which is the much more common scenario.

Have a look here - http://www.hmrc.gov.uk/cars/ - all you need to know about it.

The choice of car will affect the tax you pay as the charge will be based on the retal sale price of the vehicle including any options multiplied by a percentage (from 15 to 35) depending upon the Co2 emissions of your car. So if you opt for a BMW X5 costing £50,000 with a high Co2 (35%) then the 'tax' will be £50,000 x 35% you'll be looking at £17,500 per year. A Vauxhall Vectra costing £15,000 with a clean Euro IV diesel will be around 18% Co2 so a tax of £2,700 per annum....which is why most company car drivers have mondeos, vectras, etc.

So if you earn £35,000 you need to deduct £2,700 for your Vectra meaning your salary is actually £32,300 - now if you visit this website - http://www.thesalarycalculator.co.uk/salary.php and punhc in your salary after car tax (£32,300) it works out, give or take a few pounds, your annual take home pay after tax/national insurance - in this case £23,561 after taxes - makes you weep to be a high rate tax payer I can tell you.

Spouses are normally allowed to drive a company car with your permission but doesn't normally extend to your Dad/Mum, mates, etc and you normally have to pay the excess in the event of an accident and if they feel it was malicious (ie, drunk driving, etc) then they may make you pay for all damages to vehicle.

Most employers may offer a cash alternative they'll give you, say £3,000 a year to get your own car. Whilst the cash is taxed at 40%, as per your normal salary, you are free to pick any dirty/expensive car you like as no longer a company car. I lease my cars on 2 years terms, paid for from my 'car allowance' and can normally get more expensive and flashier vehicles within my allowance - but you need to do the maths to find out what best suits your own personal circumstances in terms of salary and car choice.

JasonLVC

With regard your no claims bonus. Provided you are accident free during yoiur employment then when you leave the company car scheme/employer ask the employer to provide a letter confirming you've not had an accident/claim on their insurance.

Most insurance companies will accept the years driving on a company car policy as if they were on your own policy. Some insurers may only accept a maximum number of years so if you've got 10 years now yourself, you drive for 6 with a company car, when you come out of the scheme they may only allow, say 5 years maximum, even though you did 6 without incidnet - trust that makes sense.

Failing that, buy an old banger and keep it in your garage on third party to keep your NCB clock ticking. Also, some new policies from Direct Line allow you to accumulate NCB whilst being on a partners policy and seeing as you'll not be driving your partners car then you'll be gauranteeing your NCB's whilst you're driving your company vehicle.

amc1

Thanks for your help.

In my case, the following applies...

"business use cars are specifically allocated for business use and are not a contractual benefit of employment. The car will be maintained, taxed and insured by the company."

A 'company car cash allowance' option is also present but they have not offered me this. I think this is because the business use car option is not as permanent and they can take it off me more easily. Another disadvantage is that they will tell me what car I'm getting rather than me being able to decide what's best from a tax perspective.

Are the tax implications handled by the employer or does the individual needs to get involved/fill in forms ?

Partner will not have a car so NCB option not possible there.

Andy_L

Sounds like they are providing you with a car purely for business use so no tax to pay unless you can use it for getting to and from work

JasonLVC

Assuming the car can be used for private use then all the tax matters will be handled by your employer via the normal PAYE route. If strictly business use only then there will be no tax. Your description does sound like it is business use only, but I'd still double check to see if you can use for private miles as this will confirm whether it's tax free or not.

if you are to be taxed, you'll just find your tax code will be adjusted so you'll see your tax code go down to 100L or something like that, so you'll just pay a little more in tax each month than normal which will be shown on your payslip, meaning you take a bit less home.

To be honest, unless you are seriously over the £32,000 40% threshold having a company car can sometimes be a pain as you end up taking home about the same money as someone else who earns £28,000 at the normal tax rate with no car!!!!.

amc1

no - there is also the line... "a business use car is regarded ny the Inland Revenue as a benefit in kind and taxed accordingly". Pretty sure it may be used in a personal capacity.

Acc72

If it is a car then driving to and from work is classed as personal mileage and therefore taxable.

There are new rules with regards to vans, whereby such travel is classed as business.

amc1

Somebody has told me that the car allocated is a Vauxhall Astra 1.7 CDTI Life 5Dr Hatch and that I would pay around £90 a month tax ? Does that sound right ?

Hoddie_2

If the car is used purely for business mileage, then no tax would be due. Ordinary commuting (ie from home to work and back) is a private journey and would mean you'd pay tax on a full benefit, even if other private use was restricted by the employer.

mor7s_2

Just to further confuse matters......

A company car just has to be "available for" your private use to be taxable, so even if you do not ever make any private use you still get the charge. A friend broke his leg and naturally couldn't drive for a while but cos the car was on his drive the tax kept running - if he handed the keys and/or car back no tax til leg all mended and car back on the drive!!

And on the insurance point, most insurers wil honour no claims whilst in a company car - you just get a letter from your employer's insurer or fleet department to send on. The one to watch for is when a spouse or partner drives your company car as their name isn't on the insurance so they might lose their no cliams - bit like being a named driver I guess.