company car vs salary sacrifice

daniel1971_2

Hi Guys, could someone just tell me if I am making a mistake with these figures.
Boss has offered me a wage rise of 240 pm.
This is likely to go up to 350 pm approx in the next 6 months.
He has said to me I can take a company car in lieu of this bonus, this sounds great. So my wage would be 24k approx and I will have to pay for the car from my wages.
The problem is that I have read that this type of scheme attracts BIK, and on the car I have been offered is £245pm.
Couple this with the increase in insurance I would be worse off by 600ish pm (although I have use of a new car)
Does this sound right?
am I missing something?
I understand that if I have a company car I benefit from the car so I should be taxed on this but I am paying tax on the 350 and also paying the 350 and also the 245 BIK.
Buying a car not an option cos this is a new job and have been ill for a while.
Thanks in advance.

daniel1971_2

BTW, the car has to go back after 2 years and I have to pay maintenance and private fuel

Caz3121

Are you sure you need to pay insurance? My company car comes with insurance, MOT, maintenance, tyres etc...I just need to put fuel in

daniel1971_2

I dont really have to, I just got a quote with my current people. I could pass this along to the boss I guess.

00ec25

daniel1971 wrote: »

I dont really have to, I just got a quote with my current people. I could pass this along to the boss I guess.

some of the info you have provided so far is conflicting and does not make sense. Typically a company car means the employer owns the car, the employer pays for the road tax, the insurance and the repairs/servicing. The benefit in kind value reflects the fact that those costs are paid by the employer, not by you.

As a separate matter the employer may, or may not pay for all the fuel it uses. If that is the case there is also a further BIK value associated with the fuel element.

your post is rather confusing as to why you say:

but I am paying tax on the 350 and also paying the 350 and also the 245 BIK.

are you saying that you will get a pay rise and also get the car on top of that as well?

daniel1971_2

Hi Thanks for the reply.
The boss is putting my wages up by 350 and has offered a car instead, so I forfeit the extra wages.
I will pay tax on those wages and also spend them on the car.
There are conflicting things on the internet about the BIK for salary sacrifice, some websites say you either pay BIK or tax on the benefit whichever is bigger, some say you have to pay both was just hoping someone knew about it. Cheers

00ec25

daniel1971 wrote: »

some websites say you either pay BIK or tax on the benefit whichever is bigger, some say you have to pay both was just hoping someone knew about it. Cheers

you are confused, you do not pay the BIK. The BK is a value on which you pay tax, ie if the BIK is 1,000 and your tax is 20% then you will pay 1,000 x 20% = £200 in tax

there are many online car calculators, why not use the HMRC one if you want a definitive answer?

http://cccfcalculator.hmrc.gov.uk/CCF0.aspx

£350 extra salary will incur 20% tax + 12% NI so you will be £229 net of deductions.

whether a net £229 in your pay is worth more than not taking the payrise but instead paying tax on the BIK of the company car is a "simple" matter of comparing the £229 to the result of the calculator and then adding in some guesses as to what you currently spend keeping the car you use at the moment on the road. For example, no more road tax, no more insurance, etc

daniel1971_2

Thanks a lot, 00, that is really helpful.