Company Car Help

Gareth_Ainsworth

Evening All

Quite new to Company Cars so hoping for some help on this board! Been researching this evening- all about BIK etc and I thought it's easier just to post!

I currently have a company car where as a result after ringing HMRC, I have a salary sacrifice and my tax code has gone from 1185l to 984l - is this classed as the BIK?

My current car is a focus - value of £21667 with co2 emissions of 99. Based on what I have read BIK is £5850.

I currently do around 15000 ish miles and earn 12p (for the first 10000).

Now the option has come where I can use my own car and receive a salary uplift of £200 a month and receive 40p a mile from the company.

Now this is where I'm stuck - I dont have my own car but I am tempted to take out a loan of around £6000 for a car and receive the salary uplift and 40p a mile.

I do 1250 miles a month, say-
1000 miles x 40p = £400
250 x 25p = £62.50

1250 x 12p = £150

462.50 - 150 = 312.50 better off, plus salary uplift. Salary uplift after tax would pay the loan per month.

Am I missing anything? Sorry for my ignorance but i want to fully understand before making my decision.

Thanks in advance

bigadaj

Just a few points.

I wouldn't have thought your company would pay fuel allowance on toP Of the mileage allowance, if so it would be above Hmrc limits and you would have to pay tax on part of it.

We obviously assume all the mileage you quoted is business, excluding personal and commute; if so then I can't see where you are leasing or financing a car with that level of mileage that's fairly new for £200 a month, worth checking actual figures. Indeed you're assuming £6k purchase price for a focus would be a few years old. You also need to factor in your insurance, wear and tear, maintenance etc

On the flip side wou would have a car which is worth something at the end of the loan, though would have to restart the cycle in a few years, but need a deposit then.

Are your figures based on actual cars that you might purchase and does your company have restrictions on what you need to have.

owen_money

As above, you wont get the 12p as well. The government figure is 45p p/m although if your company only pays 40p p/m you can claim the extra 5p back from HMRC. I recommend you have a look at the gov.uk website

From tax year 2011 to 2012 onwards First 10,000 business miles in the tax year 45p. Each business mile over 10,000 in the tax year 25p. I think you can claim an extra 5p p/m if you have a work colleague travelling with you

Even if you get £200 allowance after tax its really rubbish, however depending on your tax band you'll save quite a bit on tax. I currently pay about £360 p/m on a £40k car

Gareth_Ainsworth

Apologies- maybe I should have made myself more clear.

At the moment I am driving a focus worth 22000 (company car). I have let HMRC know and as a result my tax free allowance has dropped from 11850 to 9840. I drive approx 15000 miles a year receiving 12p a mile for all business miles. This doesn't include any personal. Generally dont do many personal as we have another car that is ours (partner uses for work).

I've been given the option to up my salary by 200 a month, receive 40p a mile and use my own car. I understand I wont get the 12p as well. I was calculating the difference between 40p and 12p on the miles I currently do to try and understand what would work.

What i was looking at doing was possibly taking out a loan for £6000 to buy a car, take the salary uplift of 200 a month (this should more than cover the repayment per month of the loan) and then receive 40p a mile compared to 12p.

Maintenance, Insurance, Tax all then need considering.

I'm just unsure which would be better - stay as I am with company car not worry about maintenance etc but have nothing that is mine, or take out the loan, pay off within a couple of years but take more pence per mile to go towards maintenance, tax, insurance.

Going round in circles as dont have much experience here.

BoGoF

The car benefit in your tax code seems quite low.....is that figure just for part year?

owen_money

To surmise you'd most likely be better off taking the car allowance. You wont have to pay tax on a company car, I would imagine that will save you at least £100 p/m plus you get the allowance as well of £200. The HMRC official rate for fuel is 45p p/m (first 10k), and I mentioned if your company only pays 40p mile you can claim an extra 5p per mile from HMRC.

Company cars are expensive, I pay about £360 p/m in tax for mine, (value £40k and like you I dont really use it much for personal use. Plus side is I dont need to worry about insurance, tax, maintenance etc., which is good as you know from experience.

Downside of the allowance is as you say you have to insure, tax and maintain it, and the big one there is if you have a catastrophic engine or similar failure etc.

Niv

owen_money wrote: »

As above, you wont get the 12p as well. The government figure is 45p p/m although if your company only pays 40p p/m you can claim the extra 5p back from HMRC. I recommend you have a look at the gov.uk website

From tax year 2011 to 2012 onwards First 10,000 business miles in the tax year 45p. Each business mile over 10,000 in the tax year 25p. I think you can claim an extra 5p p/m if you have a work colleague travelling with you

Even if you get £200 allowance after tax its really rubbish, however depending on your tax band you'll save quite a bit on tax. I currently pay about £360 p/m on a £40k car

Close, but not correct. You will be able to claim the tax back on that 5p p/m which equates to approx. 1p p/m.

Bigphil1474

OP, the car allowance sounds generous. I get £83 a month and 40.9p a mile. As above, if you calculate the total you get and divide it by the number of business miles, you pay tax on anything above 45p/mile, usually by way of tax code change. In my case, the £83 a month is car allowance so comes into the calculation. If they are saying your salary goes up by £200 a month, i.e. not car allowance, then it may not be included. So long as you only get the HMRC allowable rate or less, then you shouldn't pay any more tax. Also, depends on your gross salary in case you go above the 20% tax band.
As suggested above, your tax free allowance sounds like part year, so expect it to go down even further in the future.
I suspect you could get a decent car on contract for what you are getting, which you would be able to use outside of work anyway. (£200 a month plus extra 28p a mile?) Obviously need to consider mileage allowance cost on any contract. I've tended to buy older cars outright so there's less depreciation (in theory a bit of profit for me), but for the miles you are doing you'll want something reliable. I only do about 3k business miles a year. Swings and roundabouts I suppose - worry free motoring vs. saving money with the risk of paying everything yourself. If you have some mechanical knowledge or friends/family in the trade, that would help - my brother is a mechanic so family rates always apply.

Scrapit

I get a decent car allowance,£400 per month, and this covers my hp payments (nearly) on a car I quite like. Now I had put down a small deposit and have to pay rfl and insurance on the thing Inc business miles which isn't cheap but I get a car at the end of my hp term which should have a fairly decent trade in still. Its a fairly good way of purchasing a new car imho.

unholyangel

OP, remember that £200 will be subject to tax & NI. So will be more likely about £136 if you're a basic rate payer.

Have you checked realistic mpg figures for the vehicles you're considering? Factored in likely repair costs of an ageing vehicle?

Personally, even if the company car was slightly worse in money terms, I'd probably go with it anyway. But then I'm comfortable enough financially where quality of life is of more importance to me. So it would appeal to me to pay a little to have someone else handle all the potential headaches