Company car- worth it?

Motherofcelticdragons

Disclaimer: Very priviledged position to be in, and yes, I probably should understand the fundamentals of tax etc but I just don't, try as i might!

I'm due to start a new job in September (signed contract, just working out my notice period). It has a 5k car allowance on top of my 98k salary. We live in London, due to be part of ulez in autumn, and I am a nervous driving. We don't currently have a car, have no family nearby, and 2 children.

As such a car would be super useful, and as a nervous driver likely to be driving 2 young kids alone to visit family (3hr+ away), I'd prefer not to get a second hand one that might die at any given point on the motor way. I also couldn't afford to buy a second hand car outright so would need finance of some sort.

How can i best figure out if I would be better off using the car allowance and getting a new car and having to not think about anything other than filling it with petrol/ electricity vs getting a personal finance option- and which of those is then best?!

Appreciate if i take the car allowance rather than a car, it would push me over 100k which presumably also has implications? 

Anyone want to help me figure it out, as if I am an idiot please? 

chrisw

What you're describing isn't a company car as such, ie a car provided by the company, but additional money to help buy and run a car. The 5k car allowance will effectively be added on to your salary so that you can buy a car. You will still have to sort out how to finance it, whether that's PCP, lease or loan. You will be taxed as though you earn 103k.

A company supplied car would have different tax implications for you in as much as you are taxed according to the value of the vehicle and it's benefit to you.

DullGreyGuy

Motherofcelticdragons said:

Appreciate if i take the car allowance rather than a car, it would push me over 100k which presumably also has implications? 

Anyone want to help me figure it out, as if I am an idiot please? 

Presumably you get a choice of company car or car allowance?

If it's a company car you have to work out the Benefit in Kind value of the vehicle, this is based on a number of factors including its value and CO2 production. This BIK value is effectively then added on to your salary and you are taxed at the appropriate marginal rate on it. 

So if you take your classic middle managers BMW 320d it has a BIK value of £12,687 (assuming no optional extras) and so you'd effectively be paying £5,075 in Tax plus wouldnt be getting the circa £3,000 in net car allowance. So if that's the car you want can you finance it for less than that?

Plenty of online calculators to work out the BIK value of vehicles... if you can go full electric rather than petrol or diesel then the numbers are much more favourable. 

stuhse

The BMW330e is a real tax cheater....its a plug in hybrid so you have a petrol engine... BIK is about £3300, tax for a 40% payer £1334 a year.  A number of people at our office have got one because of this.  Pure electric cars are cheaper..but depends if this would work for your life style.  I have taken the company car option just because its great having a car where i dont have to worry about anything other than topping up with fuel and washer fluid. Servicing, tyres insurance etc is covered by the company.  If it breaks down or is damaged i get a pool car while its being sorted.  I could be a few quid better off by buying my own, but i take on all the risk and hassle to be handful of pounds better off. They can keep it.

Motherofcelticdragons

thanks all. I believe i can choose from a number of cars, ordered and managed through the company (hence me believing its a BiK, i guess, to use the above language!).

I would definitely choose hybrid as a minimum, and likely quite a small one if given the choice.

@stuhse I think your thinking is aligned with mine. I guess the nit im nervous about is how much 'a few quid' would be if I took the allowance and sorted out personal finance, and I'm not quite sure how to figure it out!

should I literally be getting quotes across all different options?!

stuhse

Based on what youve said i would advise you just chose a car with a competititive BIK value and enjoy driving round in a brand new car replaced every 3? years .  You will be driving round a brand new car that is costing you about £4500 a year with no maintenance, insurance, tyres etc. to worry about.  Motoring doesnt come much cheaper or stress free unless you really know your way round cars and the 2nd hand market. Most new cars will cost you that in depreciation alone.

Motherofcelticdragons

Thanks, appreciate your feedback! 

I'll find out my options and attempt to understand a BiK calculator!

Grumpy_chap

If you go for a company car, are you able to select an EV?  That would minimise the BIK impacts (unless the Government change the tax rules).

When considering the total income, have you taken into account that your ANI (Adjusted Nett Income) will be reduced by your personal pension contributions?
And increased by other income (such as interest income)?

Going fractionally over £100k would result in the total loss of funded child care eligibility (assuming you make use of this).  It is a real cliff-edge.  Extra pension contributions to reduce ANI can be exceedingly beneficial in a case like this.

If you are not up to speed on tax matters, it may be worth engaging a professional service (Accountant) to give advice on prudent tax planning.  They can also do your tax return for you, which will simply take a load off your mind - above £100k you will need self-assessment.

Jenni_D

My go-to place for company car tax (BIK) estimations is https://comcar.co.uk/

Motherofcelticdragons

Thanks @Grumpy_chap. We don't claim child benefit (after no adjusting once earning 50k+ and needing to pay back!).

Forgive my stupidness but the added complexitiy re: 100k+ is that i qualify for bonus. 

So, lets say i earn 7k bonus, taking my annual total to £105k, if I take a company car, does that amount reduce the total I take home? (lets forget about salary sacrifice for now!). I realise this might be a really embarrassingly basic question!