Company car or monthly car allowance

BaileyMoselle

Hello
I have been offered a new job and will have a choice between

1) Accepting net 200 pounds per month and use my own car.
2) A company car in which all servicing is paid for and I only pay for the fuel I use for personal mileage. The grade of car would be Audi 3 or similar.

I can convert from cash to a company car at anytime. If I select a car I must stick with it for four years. I can also chose to pay extra each month for a better car.

I would appreciate any advice as to what would be the best option. I understand that a company car will incur additional tax liabilities.
Many Thanks

booksurr

it is a simple choice between 2 factors:

1. Money. Will using a company car cost more in tax than taking the extra salary. The answer to that is to use one of the many online calculators, here is the government's own one:
https://www.gov.uk/calculate-tax-on-company-cars
note you will need certain details about the car which you have not yet given (eg Co2)

2. Wear and tear on personal car. How good is your personal car compared to an Audi A3 when you consider how many miles you will need to travel and therefore how much extra wear and tear will go on your own car meaning you might need to replace it that much sooner than if you were not using it for business. Only you can answer that as only you know the details

Linton

And another factor - are you bothered about running a new expensive car? If you and your employer are happy for you to use a cheaper, older, privately owned car for business but pay you an allowance equivalent to having a new expensive one why not do so?

BaileyMoselle

Linton wrote: »

And another factor - are you bothered about running a new expensive car? If you and your employer are happy for you to use a cheaper, older, privately owned car for business but pay you an allowance equivalent to having a new expensive one why not do so?

I am not bothered about running a new expensive car so what you suggest makes sense. It costs money to run the company car because of the extra taxation. It costs money to run my own car because of the maintenance and insurance. The only cost if I accept the cash is the deprecation of the car. It isn't worth much anyway - between 3 and 4k.

BaileyMoselle

booksurr wrote: »

it is a simple choice between 2 factors:

1. Money. Will using a company car cost more in tax than taking the extra salary. The answer to that is to use one of the many online calculators, here is the government's own one:
https://www.gov.uk/calculate-tax-on-company-cars
note you will need certain details about the car which you have not yet given (eg Co2)

2. Wear and tear on personal car. How good is your personal car compared to an Audi A3 when you consider how many miles you will need to travel and therefore how much extra wear and tear will go on your own car meaning you might need to replace it that much sooner than if you were not using it for business. Only you can answer that as only you know the details

Thankyou booksurr. This is really helpful. I run the tax calculator and I will be taxed £2,227.60 for use of the company car. My existing car, a small Suzuki splash (2008), is a low cost maintenance car and the cash option is more than enough to cover these maintenance costs, as well as insurance at its present level. Makes sense to keep my car and opt for the extra cash and avoid the tax hit imho. I have to find out how much the insurance will go up if I use it for work purposes however.

Cisco001

How many miles do you do each year? If you do a lot of miles, company car will benefit.

Is there any restriction of what car you can use for claiming company car allowance?
Each company have different policy. E.g. one company I worked require car to be 4/ 5 doors. Reg under 7 years & under 100,000 miles.

Who need driving the car at your household? Company car usually allow your partner on the insurance as well. But if you have other people share the car, that is something to consider.

agrinnall

Is this a perk of the job or is a car a vital requirement? If the latter then I'm not sure that an 8 year old very small car is one that I would be relying on for my future career.

BaileyMoselle

agrinnall wrote: »

Is this a perk of the job or is a car a vital requirement? If the latter then I'm not sure that an 8 year old very small car is one that I would be relying on for my future career.

Mobility is essential but the car is not vital. I have done similar roles and relied completely on public transport. You are placed on a client site and set up in a hotel nearby. So the main daily travel is from hotel to client site and in many cases you can walk to the site. Also the car has been well maintained and is very reliable. From my understanding if I took the cash option my public transport expenses would still be paid on top of the cash allowance.

BaileyMoselle

Cisco001 wrote: »

How many miles do you do each year? If you do a lot of miles, company car will benefit.

Is there any restriction of what car you can use for claiming company car allowance?
Each company have different policy. E.g. one company I worked require car to be 4/ 5 doors. Reg under 7 years & under 100,000 miles.

Who need driving the car at your household? Company car usually allow your partner on the insurance as well. But if you have other people share the car, that is something to consider.

There are a range of options and three grades. You can go down a grade and receive money back or pay more money if you go up a grade. A spouse can drive the car also, but not my partner since we are not married.

Mileage is hard to calculate. It depends on where I am sent, and that could be anywhere in the UK.

Amoore

I was (forced) into the same situation when i changed jobs last month.

I was a company car driver (circa 25000 miles per year) and was paying nearly £200 a month in tax just on the car.

Moving to my new job I have a £400 a month car allowance and am expected to be doing less mileage per year.

I'm better off having my own car (not that i get choice as an allowance is all that is on offer), plus i get to go car shopping when i feel like it =D, but consider the impact on your Tax code, how many miles you'll be doing, especially if your salary is in the mid £30K to mid £40K range.

Some companies (take mine for example) do leverage rules such as age (5 years old max) and total mileage (100000 per year) of the car you are driving plus they can request proof of business class insurance.

On the insurance side it is worth investigating what a private policy will cost It cost me an extra £17 a year to add my wife to the new car. Adding me to hers saved us £85 a year, plus there's the multi car discount applied to the policy of our new car as it's more expensive.