Company car or car allowance?

Spidernick

I'm afraid you'll have to give more details, such as what the car benefit will be and what the fuel benefit will be, whether this will be taxable at 20%, 40% or 45%. If you apply the relevant rate to the benefits then that is the tax you will pay on this. If your annual running costs are currently more than this then you will, on the face of it, be better off taking the company car. If it's borderline or slightly more than your normal annual costs then you would still be better off taking the company car, to allow for unexpected repair bills, depreciation, things like that. Saying that, if you would get a higher salary or car allowance without the car then you need to factor in the additional cash (net of tax and NI) you'd be losing with the company car. Much to ponder!

I think that covers the basics, but there are quite a few variables to consider. It's a bit like a fixed rate mortgage (company car) where you have the surety of a fixed price each month, against a variable rate mortgage (car allowance) where it may well work out cheaper when things are going well, but a rate rise (repair bill) could scupper it.

barmbyarmy

I am totally lost on this. My employer is starting a new venture elsewhere and wants me to travel 130 mile round trip each day to manage the new place. They have offered me a company car plus fuel costs, but i will be hardly any better off in my pocket apart from having a nice new car outside my house.
Do i reject the company car which will cost £400 per month and use my own car and have the £400 in my wages.
Even if i do this for just the first year it will be a nice sum to bank after tax and then take the option of company car in 2nd year.
Really need some advice

Dan_Stevenson

Hi everyone, i hope someone can help me as i feel like i have been going round in circles.

I can not work out what is better for me, company car or car allowance. See below.

I am currently earn £37,000/year. My current car benefit is £7211 (i have a bmw 320 m-sport diesel)

now i understand that if i got rid of my company car then my take home pay packet would go from £1868 up to £2,212. (increase of £343/month in my pocket)

i am now being offered a company car allowance of £450/month and i believe that i would take home £2,481/month (increase of £612.45/month in my pocket)

if this is the case then as long as my personal car does not cost me over £600/month i will be better off?

Does this look right?

davgray

Can't seem to see any discussions on people running an old car on car allowance. All seems to be based on buying a new or almost new car or lease hire. I'm currently running a company car and have been for the passed nearly 8 years, which has been ideal as my previous job role I was doing 30,000 miles a year sometimes so was great with servicing and repairs etc. I now work closer to home and pretty much jump straight onto a motorway and is now about 19,000 miles a year. I'm now thinking of taking the car allowance of £5000 a year and buying a £1500 bog standard car which will be 10 plus years old(our company has no age restrictions) with 12 months mot on, something like a ford focus which are cheap and plentiful. Now I was thinking with the taxed saved from not having a company car (currently around £100 a month) and then gaining the extra cash after deductions from the car allowance and factoring in insurance and tax the car would in theory have paid for its self after around 6 months. Now the risk is the car could go wrong, if the car lasted 6 plus months I would be making money. Also if it failed its next mot and would cost alot to repair I could scrap and just buy another cheap 12 month mot car and still be ok. Basically there seems to be a low risk going this menthod if your prepared to have an older car, but not certain if many people go this route?

LogisticsP

Apologies, I have read all the thread and I am confused. This is the first time I have had a car allowance and my employer is very unhelpful in this area which makes me think they are hiding something.

I earn £45,000 per year.
I have a £4,200 per year car allowance on top.
I get 0.15p per mile fuel allowance.
I driver my own car which is a Range Rover 3.6 TD V8.

Obviously this is on the heavy side of the fuel bracket but I tow a caravan which an everyday car could not do.

The £4200 covers me for what ? Insurance, servicing and wear & tear ? My employee says this is also towards fuel.

Can I claim the difference between £0.15p and £0.45p by filling in a SA online form ? If so what do I need to do this. Do I just keep the total mileage I do in a tax year ?

Thank you for any assistance. It's kept me awake tonight worrying about it ! Sad I know.

Darksparkle

LogisticsP wrote: »

Apologies, I have read all the thread and I am confused. This is the first time I have had a car allowance and my employer is very unhelpful in this area which makes me think they are hiding something.

I earn £45,000 per year.
I have a £4,200 per year car allowance on top.
I get 0.15p per mile fuel allowance.
I driver my own car which is a Range Rover 3.6 TD V8.

Obviously this is on the heavy side of the fuel bracket but I tow a caravan which an everyday car could not do.

The £4200 covers me for what ? Insurance, servicing and wear & tear ? My employee says this is also towards fuel.

Can I claim the difference between £0.15p and £0.45p by filling in a SA online form ? If so what do I need to do this. Do I just keep the total mileage I do in a tax year ?

Thank you for any assistance. It's kept me awake tonight worrying about it ! Sad I know.

You can only claim tax relief for business mileage, not total mileage.

The 45p per mile also reduces to 25p per mile after the first 10,000 miles per year.

redpete

LogisticsP wrote: »

Apologies, I have read all the thread and I am confused. This is the first time I have had a car allowance and my employer is very unhelpful in this area which makes me think they are hiding something.

They are really unlikely to be hiding something, it's far more likely that you are confused and whoever you are talking to isn't explaining it clearly.

I earn £45,000 per year.
I have a £4,200 per year car allowance on top.
I get 0.15p per mile fuel allowance.
I driver my own car which is a Range Rover 3.6 TD V8.
...
The £4200 covers me for what ? Insurance, servicing and wear & tear ?

It's towards the costs of running the car, it doesn't really matter how this might notionally be split up.

My employee says this is also towards fuel.

As above - not relevant; they pay you an amount that is taxed and does not vary with mileage.

Can I claim the difference between £0.15p and £0.45p by filling in a SA online form ? If so what do I need to do this. Do I just keep the total mileage I do in a tax year ?

Sort of, you reclaim the tax paid on the difference between 15p and 45p; so if you travel 1000 miles you will be paid £150 by the employer, you claim tax relief on £300 which is either £60 for a 20% tax payer or £120 for a 40% tax payer..
You need to keep a log of the journeys taken (date travelled, miles travelled, start and end points).

Spidernick

The cynic in me just sees a 'car allowance' as a means by which an employer can pay an element of an overall salary without having to contribute any pension on it!

redpete

Spidernick wrote: »

The cynic in me just sees a 'car allowance' as a means by which an employer can pay an element of an overall salary without having to contribute any pension on it!

Easier still if they left the salary as it was and didn't pay the car allowance. Illogical cynicism.

Spidernick

redpete wrote: »

Easier still if they left the salary as it was and didn't pay the car allowance. Illogical cynicism.

Er, not if the market rate for the job is the total salary, including the car allowance. Sorry if you can't understand that!