company car

curty510

My OH is due to have her company car replaced(every 4 years). Her boss has said she can either have another company car(about £80 per month BIK) with HMRC mileage allowance(approx 13p mile)or have £5k per annum towards using her own car with 25p per mile, plus she wont have BIK deducted from her salary.

Using our car is not an option as it is a 4x4, has p**s poor mpg and tyres cost £200 per corner.

It's a no brainer to not go for a company vehicle, and either buy or lease her a car. Anyone else take advantage of this scheme got any tips?

She drives about 20k per year.

flashg67

Is the 5k taxable? This will reduce it's value. Haven't done the maths, but on the face of it, even with the reduced mileage allowance, £80 tax liability per month sounds cheap? You can't lease much privately yourself for that.

sillygoose

As above, if they are a higher rate payer that could be 5000 - 40%, not good!

Also the HMRC is currently considering a new policy of comparing the tax on a car allowance with what the driver would have paid in BIK had it been a company car - and charging you the higher of the two!

Presume any car you are paid mileage on would be analysed as if a company car.

This needs to be kept in mind, if you take the cash and buy/lease a high emission car, then if they bring this in you will be stung for a high BIK and might be stuck in the middle of long lease. Just keep in mind getting something good on CO2 rating.

jimjames

£80 per month for a new car, fully taxed (and fuelled??) seems like a brilliant deal. We get a car allowance but with no restriction on vehicle are running a 15 yo VW Golf as the company allowance car. Cost £500 and not bad with £5k per year to run it even after tax.

marlot

The only way to answer it is to create a spreadsheet and add up the costs of each.

I would expect the company car to be the better bet for that sort of mileage.

curty510

We discussed it yesterday evening. We looked into buying a car, but unexpected repairs could possibly make it an expensive choice. Leasing a BMW320d with maintenance package with a mileage allowance of 25,000 would cost approx £400 per month with insurance.

The list of company cars available to her is quite extensive, for example an Astra CDTi Elite Nav or Focus Diesel Titanium approx £65pm. I agree with the comments and think this is the best option. Cheers guys

Rain_Shadow

gilberto wrote: »

Go for a used VAG 1.9 TDI and keep the rest for repairs and servicing

Of which there could well be plenty running a ten + year old car for 20k a year. Not forgetting how impressed her employer will be with her not being able to do her job when it is being fixed.

curty510

Rain_Shadow wrote: »

Of which there could well be plenty running a ten + year old car for 20k a year. Not forgetting how impressed her employer will be with her not being able to do her job when it is being fixed.

this is our problem, because of her role, she works in a different location most days, and is heavily relied upon to be there.

rob7475

A car allowance has the same tax/NI implications as basic salary. So, you need to work out if that extra 6k a year will take you into the 40% tax band if not already. Even on the 20% band you will lose about £150 per month with tax/NI so only have £350 left over. You then need to take into account what you currently pay BIK for your company car (£80 in your case). So £430 is the amount you will have per month to buy a car, insure it, service it etc.

Plenty of people will tell you to buy an old car and save the rest for repairs. You've got to ask yourself though, after driving a new company car, will you be happy driving an older car?

Financially, I don't think there'll be much in it if you buy/lease a new car with your car allowance so the decision needs to be based on whether you want the hassle free option of a company car or the chance to choose your own car.

I have a car allowance and although it doesn't cover the cost of running my car, I at least know, I've still got a car if I leave my job for whatever reason. I bought a 6 month old model which worked out better than leasing/buying new and I still have plenty of warranty.

jimjames

Rain_Shadow wrote: »

Of which there could well be plenty running a ten + year old car for 20k a year. Not forgetting how impressed her employer will be with her not being able to do her job when it is being fixed.

I think you're overestimating the problems with a 10 year old car if it has been properly maintained.

rob7475 wrote: »

I have a car allowance and although it doesn't cover the cost of running my car, I at least know, I've still got a car if I leave my job for whatever reason. I bought a 6 month old model which worked out better than leasing/buying new and I still have plenty of warranty.

The opposite is also true. If you leave the job for any reason then you are still saddled with an expensive car deal for the length of the contract even if you can no longer really afford it. Mate had exactly that problem when he was switched from company car to allowance and made redundant some months later.

curty510

yes, the extra money will also push her into the 40% tax band, She pays the max allowed into her works pension to keep below it as it is, so could be financially worse off. To be fair the list of cars is extensive. She has arranged to test drive a couple next week, so will see how that works out. But agree, she is used to driving a new car and wants to stay that way. cheers for the tips.