2 questions - married tax allowance and company car dilemma

sunrise27_2

first question - I think I'm right , but I used to be able to transfer some of my personal allowance to my husband so that he didn't pay as much tax . Then the tax office stopped this saying as my husband is now a higher tax payer we couldn't do it,
the book keeper at my husbands firm has just said that as long as he earns less than £50.000 then we can still claim it, I don't think she's right I thought it was nearer to £45000 ??


also my husband has a company car and the tax is killing us, he thinks his boss might suggest having a car allowance next year and using that to take out a personal car lease ?? am I right in thinking we would be better off financially doing this ??

zagfles

sunrise27 wrote: »

first question - I think I'm right , but I used to be able to transfer some of my personal allowance to my husband so that he didn't pay as much tax . Then the tax office stopped this saying as my husband is now a higher tax payer we couldn't do it,
the book keeper at my husbands firm has just said that as long as he earns less than £50.000 then we can still claim it, I don't think she's right I thought it was nearer to £45000 ??

The book-keeper is talking rubbish - you lose the ability to transfer the PA if the recipient pays higher rate tax, which is £45,000 this tax year. £50k is where child benefit starts being withdrawn which she might be thinking about.

also my husband has a company car and the tax is killing us, he thinks his boss might suggest having a car allowance next year and using that to take out a personal car lease ?? am I right in thinking we would be better off financially doing this ??

Not necessarily, it depends on lots of things. Value of the allowance, taxable value of the car, what car he chooses etc. The allowance will be taxable, though if he uses it a lot for company business he could get a lot of tax relief.

sunrise27_2

I knew she was wrong lol
ok we will have to look into the whole car thing . It won't happen until next year anyway but wheres the best place when the time comes to find out the best way to do it ?

polymaff

zagfles wrote: »

... you lose the ability to transfer the PA if the recipient pays higher rate tax, which is £45,000 this tax year.

Not strictly. You lose the MAT if the recipient is what HRMC define as a higher rate tax payer - which will include some who do not pay HMRC any tax at the higher rate.

The era of tax simplification, Huh!

ruperts

You'll have to do the maths on the car allowance v company car thing yourself. Use a salary calculator to compare his take home pay with the allowance against his current take home pay. The difference will then effectively be the budget with which you have to buy, insure and maintain a car. Employers impose conditions on age so you can't just buy an old banger. When I was looking at the same question two years ago the company car came out cheaper for the same car model, but I could have saved some money by buying a cheaper used car with a loan. All savings would have been wiped out by any major problems with the car though, so I chose the company car mainly for peace of mind that if anything goes wrong I don't have to pay for it. Whether that's the same for you will depend on the value of the allowance and the conditions the employer imposes.

dori2o

Generally, IMO, a company car will almost always work out cheaper when comparing to a new/nearly new car.

Even where you buy an older used car, a company car may still work out cheaper when you take into account maintenance, repairs, recovery insurance, MOT, reliability, higher MPG as an older car generally is less economical on the road, and of course insurance.


If you've had a company car for many years you may find you have no, or little no claims bonus as some insurers will not consider the accrued no claims period whilst using a company car.

Others will honour no claims periods but generally only with a letter from the employers insurance company which confirms you were the only user of the vehicle and the no claims information.

The opposite however is generally the case with Car Fuel benefit unless you have very high private mileage.

Again, as someone else has said, your employer may insist that as part of the agreement to pay you a car allowance, the vehicle you buy for yourself may have to meet certain specifications, especially if your in a customer/client visiting role where the vehicle will be seen. Some employers may insist on you purchasing a car which is no older than a certain limit. They may have restrictions on colour (a taxi company near us insists that drivers cars are either Black, White or Silver only. It matters not if their staff are employees or self employed, they are not allowed to drive for that company if the car is not black, white or silver.

The thing to remember is, if the car benefit value is £6500, and your employer agrees to give you an equivalent amount as cash as a car allowance should you give up the company car, the amount of tax you would pay will be the same, its just that rather than having the car you would have the cash with which to hire/lease or buy your own car.

Also remember that if you were to lease a car that lease companies really dont like high mileage drivers, and so impose much higher charges for high mileage. Also if you go over the agreed mileage then most lease companies charge fees per extra mile, plus VAT.

sunrise27_2

At the moment the benefit in kind for the car is about £9000 and his car is worth about £36000 . This is all guess work at the moment but he will probably look at card worth £26000 next year with a car allowance per month of about £330 ish per month before tax. Hubby also says he gets paid about 14p per mile for business petrol use at the moment and that would go up to about 42p per mile.
Maybe I'm being naive but i just thought he'd get paid £330 allowance a month . Get taxed on it then take out a personal allowance for the car . Any money left would go towards services etc . It would be a brand new car. But this is all starting to sound very confusing lol

sunrise27_2

Sorry at the end I meant personal lease not personal allowance.

dori2o

You need to look at whether he can get the car he wants/needs for £330 per month (less tax and NI so more like £225 per month if a basic rate taxpayer).

Also most lease plans require a substantial deposit. Especially if he's going to have high mileage.

If your looking at this from the point of view of being able to claim the Marriage Allowance Transfer, which is worth £230 a year (£19.16 a month) to the recipient, then you could find that you are much worse off.

Would it not be possible to simply change the company car for something much cheaper and with lower CO2 emissions which will have the effect of lowering the BIK?

If not the first thing to do is to research the cost of lease agreements which allow social/domestic/pleasure and also business use if hes going to use it for business travel, and if necessary those which allow high mileage.

IMO there wont be much choice in lease agreements for just £225 a month.

sunrise27_2

Thank you . I think it's his bosses that want to make the change to a car allowance. Unfortunately i think he is now a higher tax payer but he is willing to downsize the car to something more sensible . We will have to look into it more closely I think . Hubby thought going for a car allowance would work out better financially for us now I'm not so sure. And I know we won't get the married tax allowance I just knew the book keeper has got her facts wrong . What if his bosses paid the big deposit when sorting the car out would that make a difference ?

sunrise27_2

Also if we were better off per month because of not having a company car we could use some of that to pay towards the lease ? Or am I again being deluded lol