Company Car or Cash?

philng

I am due for renewal on my Co Car. These are some of my options:

1) Take £340pm in cash less tax & NI. Likely to be 40% tax payer so assume i will only receive £170pm net?
2) Take Co Car such as Audi A4/Mercedes C Class or BMW3 receive no cash above BUT pay between £125 & £170pm PLUS add tax of £100 to £130pm BUT pay no road tax or car ins. Hold car for 4 years & only have to pay the first amount for 3 of the 4 years.
3) Total effective cost for Co Car is lost Cash £170 + add payment say £140 plus add tax say £110= £420pm with nothing to show for it after 4 years (3rd yr payment would be less £140pm.

Which is the best option?

Nicola_Ed

Hi

Comparing the cost to you of running the same car personally or sacrificing your salary and paying extra income tax, the latter will probably cost you less. However, if you already have a car in the family which you could use for business at no extra cost, you may wish to take the extra net pay. I suggest you cost up a car you would have if you were buying it personally - which may be a much cheaper spec than the company vehicle - and compare the cost of this vehicle with the salary sacrifice/income tax cost if you took the company car.

martinsurrey

I would only take a company car if I liked small efficient cars (or electric), due to the increase in BIC rates.

I dont, so I took the cash and bought my own car.

somethingcorporate

Likely to be a 40% tax payer or will be? Makes a difference as to whether it is 20% or 40%.

Bean_Counter

You also need to factor in the fuel and what rates the company will reimburse you at. Will it be 45p per mile if you run your own car? How many business miles a year will you do?

Sinhanada

Also worth thinking of the fuel rate. This is set by HMRC and when I last drove a lease \ company car was 13p per mile for diesel. That added to the fact I was taxed more for the privilege of driving it to and from work meant I actually paid more. It would all depend on what mileage you do as to whether or not this is cost effective for you

philng

Fuel rate repaid by company for use of own car would be 18p per mile but I believe I can then reclaim tax on the difference of 18p and 45p up to 10000 miles per yr. I would do approx 13000 business miles per year and at present with co car dont have to pay any road tax car ins or repair maintenance.
I would definitely be a 40% tax payer but currently mitigate this by making the excess pay to my pension on which I then receive the 40% relief back.

Nagme

Do check for any restrictions with receiving the allowance; DH receives an allowance of £6,000 per year, but after tax that is £300 per month. He has to make sure that he has a car that has 4 doors and is less than 4 years old - we lose quite a bit of money through depreciation.

redmalc

Please be careful with taking the allowance,a close friend of mine got a very good monthly cash incentive to sort out his own motor vehicle on personal finance agreement.
In June he purchased a very nice Merc on a three year agreement,a month later he had a stroke,only 40 years of age,he is now burdened with the vehicle which he will not be able to afford because he will not be able to continue with his employment

zygurat789

Nagme wrote: »

Do check for any restrictions with receiving the allowance; DH receives an allowance of £6,000 per year, but after tax that is £300 per month. He has to make sure that he has a car that has 4 doors and is less than 4 years old - we lose quite a bit of money through depreciation.

That's after 40% tax, there is another 2% NI which brings it down to £290 per month.

Nagme

zygurat789 wrote: »

That's after 40% tax, there is another 2% NI which brings it down to £290 per month.

Thanks Zygurat, you're right - NI also needs to be factored into the spreadsheet

If we were to have the company car, we would be taxed something in the region of £200, threrefore the difference between a car allowance and a company car is £500., So we asked ourselves if we could run a car for under £500 per month including depreciation, road tax, tyres, servicing, insurance etc. It is just about on balance, we are not making any money from it, but it allowed us to have the car of our choice rather than an Audi A4 saloon, Prius or VW Passat.