Company car or car allowance - where do I start??

Timbo29

Hi there
When my colleague retired 18 months ago I was very fortunate to get his company car. 
The lease ends in 5 months. 
I'm now getting heavily taxed for the car - my car code has been as low as 53LX, and now 118L. 
My gut instinct is to make sure the car is handed back, but trying to compare is it is a bad deal or not, and how it compares to a car allowance.
Albeit, from a glance is appears that it costs be a great deal of money, but similar to say if I had more salary but had a personal 'PCP deal. I've used this as a comparison as generally would want to use 'new car' for business purposes. 
It also appears I don't get the 45p a mile rate, and instead get a low mileage rate. 
Anyone had a similar conundrum? Found any useful guides or ways to make a good comparison?
Anyone got any good guides on what new cars are good to buy - e.g. do Electric vehicles have lower tax? 

Grumpy_chap

Timbo29 said:

Hi there
When my colleague retired 18 months ago I was very fortunate to get his company car. 
The lease ends in 5 months. 
I'm now getting heavily taxed for the car - my car code has been as low as 53LX, and now 118L. 
My gut instinct is to make sure the car is handed back, but trying to compare is it is a bad deal or not, and how it compares to a car allowance.
Albeit, from a glance is appears that it costs be a great deal of money, but similar to say if I had more salary but had a personal 'PCP deal. I've used this as a comparison as generally would want to use 'new car' for business purposes. 
It also appears I don't get the 45p a mile rate, and instead get a low mileage rate. 
Anyone had a similar conundrum? Found any useful guides or ways to make a good comparison?
Anyone got any good guides on what new cars are good to buy - e.g. do Electric vehicles have lower tax? 

Hi Timbo,
The company car / car allowance question is quite a complex one, so you need to start by setting out the basics of the choices:

How much is the car allowance you are offered?
What mileage rate will you be offered for business mileage if you take the car allowance?
What restrictions are there on the private car used for work under the car allowance?

How many private miles will you do in a year (includes commuting)?
How many business miles will you do in a year?

What mileage rate will you be offered for business mileage if you take the car?
What choices of car are you offered?
Do those car choices include all-electric car?  (Much less BiK tax for an all-electric car.)
Can you charge a car at home?
Can you charge a car at work?

Does the company car you would be offered meet your personal needs, or would you need an additional car as well?  (No point having a company Focus if you have partner plus 6 children to ferry around.)

Once you have set out the above, you can start to set out the difference in financial position between the options. 

It often likely comes down to a bit of a balanced and nuanced outcome where your preferences start to have an influence on what is the correct decision for your circumstances and may be different to what is the correct decision for someone else, even with quite similar circumstances.  For example, two individuals could have identical circumstances, except one "must" have a brand new car every three years whereas the other may be happy with a three-year old car every three years.

Dazed_and_C0nfused

It also appears I don't get the 45p a mile rate, and instead get a low mileage rate. 

Why would you get that?  It's intended for people who use their own car for business, not for those provided with a company car.

And when deciding what to do remember HMRC don't pay 45p/mile.  Your employer can pay 45p/mile (when using your own car) without any tax payable by you but if they pay say 20p/mile you can't get the other 25p/mile from HMRC. 

You can claim tax relief on the difference (25p/mile), which for most people is worth 5p or possibly 10p/mile.

Bigphil1474

OP, agree with both above. The company car will be be maintained, bought/paid for you, no depreciation costs to you etc. so you would normally just get the fuel allowance rate not the mileage rate. You should ask about what mileage rate your employer would pay if you use your own car for work. It's usually cheaper if you use your own car for work, - depending on the mileage you do, mileage rates and any lump sum payments. It might come down to company policy on what age car you can drive. My employer doesn't specify so I've driven 10+ year old cars and 2 year old cars. (Never had a new car). 

I work in local government and we get 40.9p per mile plus a lump sum of £893 over a year. Actually works out slightly over 45p a mile for me so my tax code is around 1130. In the days when we used to get below the HMRC rate, I used to get a tax rebate back from the government around November time for a few quid. 

I think overall, company cars will be a harder hit to your pocket, as you are usually able to use the car for non-work use as well as work. If you use your own car, you are being paid to use your car for work, so there is less benefit in kind. 

In terms of what car to buy - that's a question with a myriad of answers. For work, you need to think of the type of mileage you'll be doing. Long trips up and down the motorway will suit some cars whereas lots of local short journeys will suit others. An electric car might be ideal for local driving, but could be a pain if you are doing 300 mile round trips quite often. All my trips are within 20 miles of my house, so an electric car would be ideal for me, but charging is currently an issue as I work at home, and have no where to charge at home. Also worth looking at salary sacrifice schemes if your employer has them.