Car Allowance & Mileage Question

CeePeeBee

What bugs me is that I currently pay around £1500 in BIK tax for the 1 series BMW I have as a company car now. Even being paid c. £6k pa more, I can't find a way of getting a similar car for the same money and still coming out on top. c. £300+ for either HP, PCH, or purchase with finance, plus insurance etc...get's me right back where I am now...

fatrab

Are you sure that's all you pay in BIK tax? Seems awfully low, I could be wrong but I'd have thought you'd have been closer to £4000.


Maybe ask over in the Tax section of the forum and get some clarity on that?

CeePeeBee

Hi fatrab,

The BIK rating on the car I currently have (1.6 BMW 1 series) is £4640 so I'd be paying either around £930 or £1850 depending on whether I was lower or higher tax rate payer.

As my salary is sitting at £42200 currently, I'm lower.

Any advice on the car front in terms of what might be best (HP, PCP, etc) would be most beneficial as currwntly I can't seem to get an okay car for work, with insurance, for less than around £350 which is approximately what the salary increase puts on my net monthly take home which means I'm at best, the no worse off. Makes it hard to move for this package (which is fine) so I just want to be sure my maths stacks up and I've considered all the options.

Thanks for your help so far!

fatrab

Other than buying a cheaper car I don't really know what to suggest.

I receive £4950/annum. At the moment my car payment is £402/month but I chose a car that I wanted as opposed to just picking the cheapest suitable car. My Insurance is just under £400.

I'm changing to a car which will be under £200/month and slightly cheaper to insure so I'll be making a little profit from the allowance but not much.

fatrab

Bear in mind, with the car allowance you will own the car eventually. With a company car paying BIK you never own anything. Think about what the car will be worth in 2 or 3 years time and work that into the calculations.


I don't know anyone who thought they were worse off after switching to car allowance.

Bigphil1474

OP, the 'private' scheme you refer to might be what I know as grey fleet. Essentially, you provide your own car and you claim back an allowance/mileage from your employer. I work for local government and I provide my own car and get an annual allowance of £963 pounds plus 40.9p per mile driven. The 'profit' is taxable - I only do about 3000 work miles a year though, as my driving is all local. For me, doing 3000 miles, I receive £2190, but am entitled to £1,350 tax free - so the taxable amount is £840 which comes off my tax free allowance. The more miles I do, the less the profit.
If you are based at home, then that is your normal work place. Our company rules are that you can claim any work miles from your normal work place to a job, and back. Unfortunately, they don't recognise my home as my normal workplace, but in your case they may? Check with HR.
In terms of your salary, I would have thought wage + car allowance is best - some of your car allowance will be tax free, if they pay less than 45p a mile, and your wage would be up to 20% tax. Whereas all of the top bit of your wage will be 40% tax if it was wage only?

rob7475

If they are offering to include your car allowance in your basic salary, I'd accept that rather than splitting it. The tax implications are exactly the same - it's all classed as taxable income. However, if your car allowance is a separate line item on your payslip, you miss out on pension contributions, annual % salary increases, overtime payments etc.

With a car allowance, you may be able to keep a car longer. Our company policy is we can keep a car until it's 8 years old. My current car was a £25k SUV bought at 6 month old for £17.5k. If I keep that till it's 8 year old, it will have cost me £200 per month to buy the car + insurance, tax, servicing etc. I get a £5k car allowance so after tax I clear about £335 per month. That leaves me £135 per month after the purchase price to cover servicing, insurance etc which is more than enough. Finally, I have the resale value of my 8 year old car - 8 year old versions of my car currently sell for between £5-£6k..

As you can see, there's lots to take into consideration but car allowance usually works out better depending on the company's policy on how long you can keep you car.

CeePeeBee

Hi Rob,

There is no option - car allowance is what this new job is offering and yes, I agree that no split is best.

I can only find a car for around £300-£350 that suits sales meetings, and then I have insurance on top of that, as well as mileage. How did you purchase your car? HP, PCP? I'm just trying to understand how best to deliver this.

Currently I'm struggling to make it work in this new role so any help would be great.

fatrab

Are you looking at cars you want or cars that are suitable to the job? If you want a new-ish BMW 116 it's going to cost twice as much as a 2015 Vauxhall Insignia or Ford Focus.

If you want to make money from the car allowance you need to make sacrifices.

There are 2015 Insignias and Focus' for under £9k. That's just over £200/month over 48 months.

Have you looked at bank loans instead of HP? My bank currently offers 3.1% on loans between £7500 and £15000. This would be far cheaper in the long run than HP or PCP

fatrab

If you want a nice car maybe a better way of looking at it is that the car allowance will give you the freedom to buy a new car whenever you want. You can buy the exact car you want instead of accepting whatever the company car choice is in your current job.

That would be a similar situation to myself. 11 years ago I had the choice of a Peugeot 207, Ford Focus or VW Golf as a company car. I initially took a Focus but had the option to hand it back a year later and take the allowance which I jumped at. Since then I have bought cars that I want, usually upwards of £20k but in recent months I've come to realise that I'd rather be debt and mortgage free than have a high performance car that is expensive to run and maintain. It never bothered me paying out more than my car allowance as I was happy with the car I owned.