Company Car v Cash Allowance

aj9648

Hi - probably been asked but here is my dilemma
I am nearing the end of my company car contract and trying to work if I should stay on or not.  These are my options:
1) Order an EV - a VW ID3 is showing with a personal use contribution of £100 pcm and would have no tax on this.  I would also get a charger fitted at home for free
2) take the cash allowance - gross is around £450 and get a lease car.  Equiv ID3 works around £280pcm
3) take cash allowance and order no car - problem as I have 2 kids to ferry around
Since March been working from home most of the time and I dont know if I will end up going back.  I do usually around 25k miles per year
Any helpers much appreciated

Bigphil1474

OP, you need to factor in the effect on your personal tax, not just the monthly car costs. Company cars have a benefit in kind (BIK) amount. I've never had one so something I know little about. I get a lump sum allowance, and monthly mileage amount. Still pay tax on anything above 45p per mile, but the car is my car so there's no tax liability on that. If you take the cash allowance, it would probably be taxed as part of a mileage allowance (depending what you get per mile). For a company car you are basically paying tax (BIK) so that you can use it for private purposes like ferrying your kids around.

caeler

I've been hearing lots of colleagues praise EVs and Hybrids for the significant reduction on BIK which is now making company cars viable again.  My last car's BIK was 32% which was just stupid so I went onto the allowance.  The main reason I did it is I wasn't fussed about having a new car and looking at the maintenance costs I am better off on the allowance.  Also an allowance gives me maximum choice about what I wish to drive whereas some company's company car schemes can be restrictive (although if you can get a ID3 yours sounds great!).  Maybe also check out what business mileage rate you would claim on both options, might help you decide. 

Grumpy_chap

I set out some specific examples of comparing company car versus car allowance in a recent thread:
https://forums.moneysavingexpert.com/discussion/6210640/company-car-allowance-tax-etc-worth-it/p3
It is important to consider the loss of the car and BIK versus the gain of the car allowance.  There is also an element of personal preference that will come into any decision.
The OP for this thread seems to also be allowed EV as company car, which is not considered in the thread that I linked.  If the OP has specific car option and allowance / fuel information, it is relatively easy to run the calculations to work out the "bottom line" difference in the specific case.

aj9648

Grumpy_chap said:

I set out some specific examples of comparing company car versus car allowance in a recent thread:
https://forums.moneysavingexpert.com/discussion/6210640/company-car-allowance-tax-etc-worth-it/p3
It is important to consider the loss of the car and BIK versus the gain of the car allowance.  There is also an element of personal preference that will come into any decision.
The OP for this thread seems to also be allowed EV as company car, which is not considered in the thread that I linked.  If the OP has specific car option and allowance / fuel information, it is relatively easy to run the calculations to work out the "bottom line" difference in the specific case.

Thanks Grumpy.  I will have a look.  What other info would you need?

Grumpy_chap

I think most of the points to consider are covered in that thread if you read it all through.
If there are clarifications after that, I will try to assist.

aj9648

I am assuming that I will not do any business mileage here and looking at the opportunity cost of either getting a new company car or not.  Also assuming we can live with one car in the household.  I dont have a fuel card.  I also need to think about the fact that my Mrs could ditch her car as well - which is a lease car costing £230pcm.  i currently drive an Audi A4 - which has no PUC on it it does attact BIK of around £4200 per year

Option 1: Take new company Car (VW ID3).  PUC of £100pcm.  As its an EV I wont be taxed   Total cost over 12 months is £1200.  Mrs can also drive my car so we can ditch the lease car when the contract ends in a few months time.  And we would save on the insurance costs (£300).  So with this option I am about £1860 better off and £6000 better off if take into account that I dont have to pay any tax on the car any more?

Option 2: Take the cash allowance - £450pcm.  At the 45% tax rate that is £202pm.  So cash wise I am £2430 better off.  saving of tax of £4200per year.  So overall I am £6430 better off.  I assume I wont buy another car and either lease another one or buy a new one when the current contract ends.
So looks like option 2 is marginally better by about £400???
Obviously if I end up doing the mileage I did before then the numbers might be slightly different.