Car Allowance & Mileage Question

CeePeeBee

Hi all,

I'm currently employed on £42k pa with a BMW 1 Series (2016 1.6) company car. The benefit of the company car is that I obviously get a new car, company mileage paid for (thanks to my work from home contract), insurance and breakdown covered off etc and only have to pay the BIK tax %'age.

I've applied for a new job, and they are offering the following: £48.5k pa which they are happy for me to split however I wish (i.e. take £5000 as car allowance if I wanted, leaving £43.5k pa as salary), and I'm a bit lost at whether I'm going to be losing out or not.

I know a lot of this depends on the car I choose but my specific questions are as follows (thanks in advance):

1. If I split my salary into "basic + car allowance" does it make ANY difference in terms of tax or other implications? Wouldn't it be easier to have as just salary all in?
2. If I continue to have a work from home contract, can I claim all my mileage for business use back from the Gov? I know that I could claim the tax difference between what the company offered (say 11p) and the Gov rate (45p?) previously. Still the case?
3. I'm trying to find the break point for a car cost so that I can work out at what point I'll lose out, so I can work back from there for a car cost (hire purchase?) plus insurance, etc. Any ideas?

I just need a few pointers here as I've never made this transition before. Moving from a car allowance to a company car made more sense as I paid BIK, and that was it - everything else was dealt with. Going the other way, with a new company is scary. I'm not even sure what questions to ask on that to make sure I'm not losing out.

Many thanks in advance

Le_Kirk

With your new job will you have to buy a car? Are you expecting to use the car allowance to fund this car, therefore monthly payments?

CeePeeBee

Hi Le_Kirk

Yes, I will have to lease or HP one with this new job.

fatrab

1. If I split my salary into "basic + car allowance" does it make ANY difference in terms of tax or other implications? Wouldn't it be easier to have as just salary all in? You'll still pay the same in tax either way. If you need the higher salary (for mortgage applications for example) or a lower salary (for CSA payments etc) these may be affected depending on how you split the amounts.
2. If I continue to have a work from home contract, can I claim all my mileage for business use back from the Gov? I know that I could claim the tax difference between what the company offered (say 11p) and the Gov rate (45p?) previously. Still the case? You can still claim the relief on the difference between what your employer pays and the 45p up to 10,000 miles, 25p thereafter (I'm not going to go into whether or not you should be claiming business mileage from "home", that's another argument!)
3. I'm trying to find the break point for a car cost so that I can work out at what point I'll lose out, so I can work back from there for a car cost (hire purchase?) plus insurance, etc. Any ideas? Not an easy calculation, last time we did this (as a collective of employees) we based it on £4500/annum and 18000miles/annum in a 1 year old diesel Ford Focus, above this annual mileage it became more sensible to take the company car instead of the allowance.

CeePeeBee

Hey fatrab

Thanks for your info - that's a great start. I would LOVE a company car, however the prospective organisation no longer offers them due to the annoying amount of short leases they ended up paying out when people left, hence the car allowance.

I'm already going to be earning 6k pa more, so I suppose as long as I can't purchase everything I need (car, insurance etc) within that I at least won't be any worse off.

So, as you seem to know a bit about this, somebody once mentioned to me that there was a "private" alternative to company cars that in affect work in the same way. Is that true? If so what option is it?

If I can compare like for like then that's a starter.

I'k just a bit lost at the moment. I'm looking at cars around 300-350 per month but I've no idea of the real world implication currently.

Aylesbury_Duck

The other consideration is pension payments. If you take some of the package as car allowance, your percentage pension contribution - and more importantly that from your employer - will be based on the salary element. e.g. if your new employer pays a 5% contribution into your pension, you are missing out on £250 p.a. of pension contributions from your employer on the £5k that is taken as car allowance. Not a massive sum admittedly but still worth factoring in when you weigh up the options.

fatrab

I've been on company car allowance for 10 years and I've never heard of a "private" scheme. What they may be referring to is where the company pays you 45p/mile flat rate. My wife gets that through her employer and I know it's commonplace in local authority, NHS etc. If you do high miles it really pays!

Otherwise I'm afraid I can't help on that one.

I'd aim low to begin with in terms if what car you buy as your first year's insurance might be a little high. I know from experience of fellow employees who have handed back their cars and taken the allowance, only to find that not many insurers take into consideration your driving history vs lack of no claims bonus.

sheramber

You do get the cost of business mileage back. You get tax relief only.

e.g 10,000 miles @ 45p = 4500. 00 ( less any payment your employer has made) @ 40% or 20% depending on your tax rate.

CeePeeBee

Hi all,

@sheramber - yes I understand that - thanks for mentioning it though.

@fatrab - I suppose I'm struggling to understand the different options (PCH, HP, etc) and what I'll need to be buying on top of that (i.e. insurance, breakdown, etc)

fatrab

PCP/PCH is essentially a lease with a deposit at the start, a set number of payments (24 or 36 months possibly) and a balloon payment at the end if you choose to keep the car (on some plans you may not have the option to buy at the end). If you're doing high miles it's probably not a good option. Personally I don't like them at all but it's down to whatever works best for you.

HP you pay a deposit and finance the balance. When the last payment is made you own the car. Watch out for high interest rates.

Breakdown cover - Autoaid.

Insurance, just follow the advice on MSE's main page. Best to find a few cars that you fancy then run quotes on all of them, see what's coming up best value. Remember to add business use.

fatrab

Make sure that you're new employer doesn't have a CO2 cap on what car you can buy for company use. I've seen this with a few companies recently, just in case you need to stick to cars under 120g/km for example.