Company car tax and costs

maurice28

Apologies if this is in the wrong place and/or a silly set of questions, but I'm having real trouble wrapping my head around company car tax! 

At work, I have the option of either a company car, or a £6,000 per year/£500 per month car allowance. The car allowance is straight forward, but when it comes to the company cars, I can't work out which option is cheaper. 

The company car team have sent through a spreadsheet of eligible cars. Against each one is a BiK rate for lower tax payers and higher tax payers. My basic salary is £48,000 without car allowance, so I'd be a lower tax rate payer. With the car allowance, it's £54,000, so a higher rate tax payer.

In working out how much the company car would cost, do I simply subtract the BiK lower rate figure from the spreadsheet from my pre-tax salary, and that's how much the car would cost me? Assuming they have the figures right in the spreadsheet of course?

Sorry if that doesn't make sense!

DullGreyGuy

Obviously havent seen the spreadsheet but the assumption would be the figures are the amount of extra tax that would be taken from your salary each year for the car. Your complexity is being on the cusp of switching to higher rate and so it'd actually be a blend of the two boxes

There may be other amounts if you have optional extras fitted or get a fuel card. 

Grumpy_chap

In round numbers:
You earn £48k, so that would all be standard rate income tax.
The extra £6k car allowance would be £2k at standard rate (£48k + £2k = £50k) plus the balance £4k at higher rate tax.

Similarly, the first £2k of any company car BIK will be at standard rate income tax and the balance at higher rate.
You will need to proportion the tax calculation appropriately.

Hope that helps.
Factors such as pension contributions and child benefit will slightly alter the calculations / impacts.

Car_54

Unless things have changed in the last few years, the BIK for the car (and any other benefits you have) are considered as salary in determining which band you fall into. 

So if the BIK took you over £51,270, then any excess would be taxed at the higher rate. 

caprikid1

I think there is a big chunk of information missing here to be honest.

IE how many miles you do a year and what the company policy is regarding vehicle age for cars outside of the car scheme.

maurice28

Thanks all, I've contacted the company car team who have offered to talk me through the various calculations etc, so will see what they say - maths never was my strong point!

Grumpy_chap

Car_54 said:

So if the BIK took you over £51,270, then any excess would be taxed at the higher rate. 

£50,270:
https://www.gov.uk/income-tax-rates

Car_54

Grumpy_chap said:

Car_54 said:

So if the BIK took you over £51,270, then any excess would be taxed at the higher rate. 

£50,270:
https://www.gov.uk/income-tax-rates

Sorry, typo! Well spotted.
It's all a bit academic on my pensions.

Petriix

... And of course, if you took an EV, the BIK would be just 2% of the P11D value. 

Jenni_D

Petriix said:

... And of course, if you took an EV, the BIK would be just 2% of the P11D value. 

And a PHEV would (typically) be 8% (whereas a diesel would typically be nearer 31%). So a PHEV or EV at £50k is still cheaper in tax than a diesel car at £25k P11D value. A real-world comparison:

Insignia Grand Sport: P11D = £22,360; BIK = 31%; Annual BIK = £6,931.60 (This is my current car, which I've had now for 5 years)
Volvo V60 PHEV: P11D = £50,875; BIK = 8%; Annual BIK = £4,070 (This was going to be my new car before Volvo cancelled the order - my employer are still twiddling their fingers so are costing me almost £100 extra each month in tax vs what I should have been paying from June onwards) 🙄

Actual tax you pay is thus depending on your rate (20% / 40% / Hybrid rate), but you can see that you'll pay less tax with an EV or PHEV than a diesel car.

Steve182

Jenni_D said:

Petriix said:

... And of course, if you took an EV, the BIK would be just 2% of the P11D value. 

And a PHEV would (typically) be 8% (whereas a diesel would typically be nearer 31%). So a PHEV or EV at £50k is still cheaper in tax than a diesel car at £25k P11D value. A real-world comparison:

Insignia Grand Sport: P11D = £22,360; BIK = 31%; Annual BIK = £6,931.60 (This is my current car, which I've had now for 5 years)
Volvo V60 PHEV: P11D = £50,875; BIK = 8%; Annual BIK = £4,070 (This was going to be my new car before Volvo cancelled the order - my employer are still twiddling their fingers so are costing me almost £100 extra each month in tax vs what I should have been paying from June onwards) 🙄

Actual tax you pay is thus depending on your rate (20% / 40% / Hybrid rate), but you can see that you'll pay less tax with an EV or PHEV than a diesel car.

Can you not squeeze into a Tesla 3? I doubt it's much smaller than the Vauxhall and they have stacks and stacks of boot space, including underfloor compartment in the rear and the small front boot. Your BIK will then be peanuts....Long range is only about £4K more than the Volvo list price and I imagine has better residuals so maybe lower lease price.....
There is now a model Y which is more MP3 like and maybe worth a look.