Better than BIK? Genius or dunce...??

jjcb119 · 25 May 2018 at 12:29AM

So. Am I missing something here??

I currently have a RAV4, on which I pay 20% rate BIK, circa £140pcm.

My pay will be going up this year and including the PD11 value will push me into the 40% bracket.

Lease on the car is up next April (2019 - I'm looking ahead here guys

)

My options are;
1) new company car, which will see me pay c£300-400pcm in BIK tax.
2) company "commercial vehicle", which will see me pay fixed PD11 of c£3k, so about £150pcm in 40% bracket (vehicle will be thirsty though and the 11p rate won't cover costs).
3) taxable car allowance and c25p per mile
4) MY INGENIOUS PLAN -

I do roughly 14-15,000 miles for work. So if I take the straight mileage rate I'm looking at 45p first 10k and 25p thereafter, which gives me about £5-6k non-taxable, right? Therefore, I take out a loan, with repayments of c£300pcm. The mileage probably doesn't quite cover the full cost of running insurance, servicing, tax and fuel, but factoring the BIK saving I'm better off each month as
it wouldn't cost me £700-800pcm to repay loan and run the car. At the end of the loan I own the assets. I sell it, pocket the cash, loan and repay again.

Am I missing anything here guys???

Dazed_and_confused · 25 May 2018 at 7:22AM

1). You do realise you don't pay 20% or40% tax on a company car, only the bit that is in the higher rate tax band gets taxed at 40%

2) £3,000 x 40% = £1,200 so only £100 month in tax, not £150

4) Who is paying you the 45p? Assuming it's your employer them that is an extra £2,000 over option 3 (where you would be getting 25p not 45p) but how much car allowance are you giving up in return? On MSE posts car allowance is often quoter as around £400/month. So you would be giving up maybe £4,800 gross which might be £2,880 if 40% tax was payable on all of it. There would be national insurance to pay as well but even so not sure I understand your thinking here.

Pennywise · 25 May 2018 at 8:11AM

Is your employer happy to pay you the mileage rate instead of paying for the car/fuel themselves?

jjcb119 · 25 May 2018 at 2:42PM

Thanks for replies.

If I negotiate a car allowance then I'd pay tax (& NI??) so net would be less the 20% and 40% of whatever was over 40k. Then I'd only get 25p or so per mile. So 14k miles in a year would be £3.5k in expenses. Added to the net value of car allowance is likely to end up less than taking the 45p (to 25p after 10k) option. Or if not less, almost negligible difference pcm.

Yes - employer happy to pay this rate, would be cheaper for them than the cost of providing my car.

Obviously this doesn't work if you don't do much mileage for work, but given I do I'm thinking it's a good way to avoid tax, cover cost of running a car and end up with an asset after loan is repayed. Essentially my mileage expenses would cover running a car and give me an asset to sell after say 3 years.

There are no other tax implications to factor in doing it this way, right?

Tiptop79 · 4 June 2018 at 3:56PM

Hi,

I do what you are suggesting and get 45p per mile for my expenses. No car allowance or company car available. Can't say I noticed too much of an uplift in my wages by getting rid of the company car though. I never seem to have to pay fuel for private mileage as the 45p covers it all, however, a new tyre costs me £309 and I don't save that money each month out of the mileage I claim. The way I look at it, I get to drive around in a really nice motor that I will own at the end of the term. Even if I went to another company and they gave me a car allowance, that would be free money as I already pay for my car myself.

Better than BIK? Genius or dunce...??

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