Car cash allowance versus company car BIK 14 February at 9:20PM in Motoring 3 replies 154 views

superleeds72

Hi and thanks in advance

I have searched high and low and cannot work out what the financial impact will be if I move from taking a cash allowance to a company car. 

I earn £77500 and take a £6000 car allowance since I started as I already owned my own car. With pension deductions I take home around £4250 each month.

I have been offered a choice of company cars as an alternative to the car allowance and I am trying to work out what my monthly take home salary will then become as a result of losing the £6000 allowance and having to pay for the car. There seem to be no calculators I can put the number in to work out the difference in take home pay.

The company car would have a taxable list price around £51K with a BIK @ 40% being around £34.50

Can anyone help with what the calculation looks like and what a future months take home pay would be?

thanks

D

Grumpy_chap

superleeds72 said:

Hi and thanks in advance

I have searched high and low and cannot work out what the financial impact will be if I move from taking a cash allowance to a company car. 

I earn £77500 and take a £6000 car allowance since I started as I already owned my own car. With pension deductions I take home around £4250 each month.

I have been offered a choice of company cars as an alternative to the car allowance and I am trying to work out what my monthly take home salary will then become as a result of losing the £6000 allowance and having to pay for the car. There seem to be no calculators I can put the number in to work out the difference in take home pay.

The company car would have a taxable list price around £51K with a BIK @ 40% being around £34.50

Can anyone help with what the calculation looks like and what a future months take home pay would be?

thanks

D

You know your current take home pay as a starting point.

Use an online calculator for the future take home pay.
Start with £77,500
Deduct your pension (assume that is salary sacrifice)
Add the value of the car BIK
Use the resulting total to get an estimate of take home pay based on the resulting number.  It will be a bit out because the way the car BIK has been built in is incorrect, but the car BIK seems to be low - I assume that is an electric car.

Steve182

Given the BIK is only £34 (net per month?) for a £51K car I assume the proposed company car is a Tesla or similar?

From your £6K allowance you pay 40% tax + 2% NI so receive only £3,528 or thereabouts in net pay from the £6K

So with the Tesla or whatever EV as a CC I calculate your net pay will reduce by £3,528 + £414 (£34.50 X 12) so £ 3,942.00 PA or £328.50/Month. 

Bigphil1474

Bear in mind the OP wouldn't pay 40% tax on all of the current £6k allowance, as it would depend on any additional mileage rates and mileage travelled - the whole amount received is compared against the 45p a mile allowance from HMRC and tax paid on the excess.

The BIK tax from a company EV will usually be far less than car allowance payments, plus you save on maintenance etc. Have you looked at mileage rates? Where I work, if you use your own car you get a lump sum plus a mileage rate of 41p a mile. If I switched to a lease car, I would lose the lump sum and receive a reduced mileage rate (11p or 15p I think). Our employer doesn't do company cars, but the principle is the same.