Company car pitfalls?

YBR

I have been offered a promotion within my company with significantly more responsibility. It will involve signing a new contract and some T&Cs will change significantly so am trying to compare.
The new salary offered is disappointing (I currently get paid Overtime, I will not on the new contract and taking this into account it's 0.5% difference), however, there is a company car or allowance as well. I know this will be taxed as a benefit in kind so I need to take that into account, on the other hand I'll save about £500 commuting by car not train.

I've not had a company car before (currently I share a car with my spouse for leisure use only) so anything else I need to take into account?

CKhalvashi

An allowance is taxable as income, a car is taxable as a benefit in kind.

Ideally you’re looking at a low emission vehicle as a company car, although if you wanted to keep the car you have (and can run it within the allowance) this may leave you in a better position, as long as it’s not to something expensive.

If it were me, I’d take the allowance and find something decent for £2-3k, then run it into the ground before starting again if your existing car isn’t suitable. The money is in your pocket then and it makes financial sense.

Untimately though it’ll depend on how much the allowance is and how many work miles you’re expected to do in exchange for it, plus any other contractual effects.

YBR

Thanks for explaining the options. The low emissions is because it affects the benefit in kind Tax rate?

although if you wanted to keep the car you have ...

I don't have an available car - I share one with my spouse and it therefore wouldn't always be available for work which is one of the conditions. So I will have to get a car (minimum 4 doors, 4 seats).

If I take the allowance I have to insure it fully comp inc business use myself with no history in my own name (ouch!). It also has to be under 5 years old so running into the ground is not going to happen.

The company car option takes care of all road tax, insurance (for me and spouse), servicing, MOTs etc (they collect from work too so very convenient). I need to check if that will give me insurance history I could use in future.

Also I just can't estimate how many work miles are likely in the new role so I'm more likely to take the car than the allowance, but then review in a year or two.

CKhalvashi

YBR wrote: »

Thanks for explaining the options. The low emissions is because it affects the benefit in kind Tax rate?

Yes

I don't have an available car - I share one with my spouse and it therefore wouldn't always be available for work which is one of the conditions. So I will have to get a car (minimum 4 doors, 4 seats).

If I take the allowance I have to insure it fully comp inc business use myself with no history in my own name (ouch!). It also has to be under 5 years old so running into the ground is not going to happen.

The company car option takes care of all road tax, insurance (for me and spouse), servicing, MOTs etc (they collect from work too so very convenient). I need to check if that will give me insurance history I could use in future.

Also I just can't estimate how many work miles are likely in the new role so I'm more likely to take the car than the allowance, but then review in a year or two.

Again, it’s up to you as to whether it isn’t worthwhile.

I would be questioning why it needs to be under 5 years old. Is there a legitimate business reason for it?

Few people I do business with see my car, and those that do wouldn’t care what it was. Are they paying fuel rates for petrol and how much? How much is the monthly allowance?

Would something like this be suitable?
https://www.autotrader.co.uk/classified/advert/201810021102547?year-from=2015&onesearchad=Used&onesearchad=Nearly%20New&onesearchad=New&sort=sponsored&radius=1500&price-to=4000&postcode=l134bt&advertising-location=at_cars&page=4

It meets your basic requirements and on a reasonable allowance would likely pay for itself in a year, you should get 2 years from it, plus whatever resale value there is before starting again. They’re not a common car (thus there’s aren’t teenagers wrapping them around trees) so should be cheap to insure.

If going down the hybrid company car route, the Hyundai Ioniq looks a good buy. For the diesel route, something under 100g/km of CO2 is ideal, although there are ikely to be adverse tax consequences over a longer term.

On pure value for money terms, a nearly new Dacia Sandero diesel would be a good bet.

Exodi

YBR wrote: »

Thanks for explaining the options. The low emissions is because it affects the benefit in kind Tax rate?

Yeah, the tax you pay on a company vehicle is based on the emissions and the value of the car (I've had a fair few company cars now and despite what most people think, you're really hoping for a smaller, cheaper company car).

YBR wrote: »

The company car option takes care of all road tax, insurance (for me and spouse), servicing, MOTs etc (they collect from work too so very convenient). I need to check if that will give me insurance history I could use in future.

If by insurance history you mean transferable no claims discount then you maybe can, but from personal experience, most of the time it counts for nothing.

I have heard of insurers accepting letters from your companies insurers stating that no claims have been taken against the company policy for however many years (yes, that means all vehicles) but in reality, I've never seen an insurer willing to count this.

Also to mention, if you place of work isn't one static location, or may be your home, you may be able to be reimbursed for fuel to and from work, but this is also rare.

System

We have one and I know pretty much all you need to know now if you've got any questions. Usually it's well worth having one. You don't accrue no claims, however it works both ways, if you have a crash (lots more likely as a person with a company car tends to drive more) it doesn't affect anything. What's your gross income?

crackerberry

A couple of companies I worked for in the past specified that - if taking the allowance- the car must be no older than 5 years old. A silly rule, but one they did enforce.



re accruing no claims discount with a company car, insurers will allow a maximum of two years no claims. I've never had a problem with insurers (Direct Line and then Aviva) on this. They just wanted confirmation from my employer in the form of a letter that I did have two years claims free.


I've taken company cars and I've taken the allowance over the years. I'd take the company car. When you factor in business insurance, breakdown cover, maintenance, tyres, wear and tear/depreciation and ensuring you have the relevant cover/measures in place for every eventuality because you can't be wthout a car when you need one for your job, the allowance has to stretch quite far. The main advantage for me of taking the allowance was, if I lost my job or left it, I still had a car, but I didn't enjoy putting the amount of miles on my own car that I used to.

CKhalvashi

crackerberry wrote: »

A couple of companies I worked for in the past specified that - if taking the allowance- the car must be no older than 5 years old. A silly rule, but one they did enforce.

I wasn’t aware of such restrictions in certain companies.

Our only rules are that the vehicle is roadworthy (most recent MoT checked and expiry logged), plus a copy of business insurance and copy of driving license to be held on file, plus the vehicle being kept tidy when used for work purposes. Such a policy seems sensible to me at least.

System

CKhalvashi wrote: »

I wasn’t aware of such restrictions in certain companies.

Our only rules are that the vehicle is roadworthy (most recent MoT checked and expiry logged), plus a copy of business insurance and copy of driving license to be held on file, plus the vehicle being kept tidy when used for work purposes. Such a policy seems sensible to me at least.

Or my experience - take the allowance but then use the pool cars or the other company car owner's cars for business.....

YBR

take the allowance but then use the pool cars or the other company car owner's cars for business.....

It is NOT the case that there are other cars available. Impossible in my situation, and immoral in my opinion.

Exodi

crackerberry wrote: »

A couple of companies I worked for in the past specified that - if taking the allowance- the car must be no older than 5 years old. A silly rule, but one they did enforce.

Can see why it's required though considering you pocket the change from car allowance. I think the majority of people make choices on company vehicles solely on how much they can save from the £500 (or so) they're given a month.