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  • FIRST POST
    • CeePeeBee
    • By CeePeeBee 9th Apr 18, 11:09 AM
    • 78Posts
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    CeePeeBee
    Simple Company Car Question
    • #1
    • 9th Apr 18, 11:09 AM
    Simple Company Car Question 9th Apr 18 at 11:09 AM
    Hi all! Happy Monday!

    I'm just looking to understand something which I think I did at some point but have since repressed the memory.

    I have a company car. What is the easiest way to see the real world impact on my basic gross salary of this company car? How do I calculate the BIK and then apply that to the salary?

    The reason I'm asking is I am toying over an offer from another employer and they have offered a flat basic which I can split up and use some for a company car if I wish, whereas my current employer does things differently so I'm trying to compare apples to apples.

    Many thanks in advance - I'm fully prepared for somebody to offer up insults about my academic IQ - I accept them willingly
Page 1
    • 00ec25
    • By 00ec25 9th Apr 18, 2:31 PM
    • 7,323 Posts
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    00ec25
    • #2
    • 9th Apr 18, 2:31 PM
    • #2
    • 9th Apr 18, 2:31 PM
    you pay tax on the benefit in kind value of the car

    there are many online calculators that will work that out for you, eg:

    https://www.gov.uk/tax-company-benefits/tax-on-company-cars
    • Pauli354
    • By Pauli354 9th Apr 18, 4:14 PM
    • 26 Posts
    • 1 Thanks
    Pauli354
    • #3
    • 9th Apr 18, 4:14 PM
    • #3
    • 9th Apr 18, 4:14 PM
    your p60 from last year will tell you the tax implication of your vehicle, or you can check the numerous online sites where you input your car details and you can get the taxable amount you are paying for the co car.
    lets say the BIK is 8000, you will pay 1600 a year tax as a basic rate tax payer, or 3200 a year on 40% tax.
    In addition, if you pay extra for your car through your salary, then add that monthly amount up as well, and that should be the actual cost of the car per month to you.

    When you say your new employer offer a 'flat basic' and you can buy a company car from that, do you not actually mean you will buy a car for business use? Thats entirely different to a company car.

    By using your own car, you will not pay an uplift or company car tax, but you will have to insure and maintain it yourself. In addition you can claim further tax relief for the business miles you drive in your own car, and this can be a substantial amount for someone doing even 15k business miles a year.
    • CeePeeBee
    • By CeePeeBee 9th Apr 18, 4:46 PM
    • 78 Posts
    • 1,036 Thanks
    CeePeeBee
    • #4
    • 9th Apr 18, 4:46 PM
    • #4
    • 9th Apr 18, 4:46 PM
    Hi Paul,

    Thanks for the reply.

    When I say the offer is a flat basic salary and the company car can come from that, it's a little odd. A lot of companies now are starting to ofer a larger basic package which things like company cars and pension contributions sit within and eat away at.

    So, in this example, what I meant is that if for whatever reason I wanted a car with a BIK value of 8000 as per your example, the 20% tax value (1600) will be taken off that.

    For example, a flat rate of 45,000 minus the 1600 means my salary will actually be 43,700. I find this way of doing things confusing, but your calculation helped me out.

    Many thanks!
    • MichelleUK
    • By MichelleUK 9th Apr 18, 6:05 PM
    • 369 Posts
    • 236 Thanks
    MichelleUK
    • #5
    • 9th Apr 18, 6:05 PM
    • #5
    • 9th Apr 18, 6:05 PM
    Hi Paul,

    Thanks for the reply.

    When I say the offer is a flat basic salary and the company car can come from that, it's a little odd. A lot of companies now are starting to ofer a larger basic package which things like company cars and pension contributions sit within and eat away at.

    So, in this example, what I meant is that if for whatever reason I wanted a car with a BIK value of 8000 as per your example, the 20% tax value (1600) will be taken off that.

    For example, a flat rate of 45,000 minus the 1600 means my salary will actually be 43,700. I find this way of doing things confusing, but your calculation helped me out.

    Many thanks!
    Originally posted by CeePeeBee
    No, that is not really how it works.

    Say an employer says you can have a package totalling 50,000 and that can include a car. The company will place a 'value' on the car you choose (probably based on the lease deal that they can achieve) and then say for example, 'You can have car 'x' (whatever you have chosen) and we will pay you 45,000 in salary'. Therefore, from your view your package is 45k plus 5k spent on a car.

    However, HMRC will value the benefit of that car totally differently. They use strict rules based on list prices, engine size, fuel type, CO2 emissions etc. So it is quite possible, if you chose a diesel guzzling expensive car with high co2 emmisions, HMRC might value the car benefit as 7,500 and this is the amount that you would pay tax on.

    To complicate things further, from April 2018, for new contracts, if you have a choice between a cash allowance or a car, HMRC will base your tax on the higher of the two (there are exceptions etc but you need to be aware of all of the potential pitfalls!).
    • CeePeeBee
    • By CeePeeBee 9th Apr 18, 6:21 PM
    • 78 Posts
    • 1,036 Thanks
    CeePeeBee
    • #6
    • 9th Apr 18, 6:21 PM
    • #6
    • 9th Apr 18, 6:21 PM
    I know that's how it NORMALLY works, but what I'm saying here is that the offer is malleable to the company car BIK (i.e. HMRC valuation). Meaning the larger the benefit in kind, the smaller the basic pay will be off the bat.

    I dislike this but it seems a lot of companies are adopting this to mitigate total outlay.
    • MichelleUK
    • By MichelleUK 9th Apr 18, 7:36 PM
    • 369 Posts
    • 236 Thanks
    MichelleUK
    • #7
    • 9th Apr 18, 7:36 PM
    • #7
    • 9th Apr 18, 7:36 PM
    I know that's how it NORMALLY works, but what I'm saying here is that the offer is malleable to the company car BIK (i.e. HMRC valuation). Meaning the larger the benefit in kind, the smaller the basic pay will be off the bat.

    I dislike this but it seems a lot of companies are adopting this to mitigate total outlay.
    Originally posted by CeePeeBee
    I was basing my comments on this:

    ...So, in this example, what I meant is that if for whatever reason I wanted a car with a BIK value of 8000 as per your example, the 20% tax value (1600) will be taken off that.

    For example, a flat rate of 45,000 minus the 1600 means my salary will actually be 43,700.
    Originally posted by CeePeeBee
    In your example, I would think that the 45,000 would reduce by 8,000 making a salary of 37,000. The company would ideally want to keep their costs the sameish, whatever you choose, by only reducing your salary only by 1600 it would cost the company loads more than 1600 p.a. to supply you with a car.

    I think maybe you have misunderstood what is on offer.
    • CeePeeBee
    • By CeePeeBee 17th Apr 18, 1:33 PM
    • 78 Posts
    • 1,036 Thanks
    CeePeeBee
    • #8
    • 17th Apr 18, 1:33 PM
    • #8
    • 17th Apr 18, 1:33 PM
    Hi Michelle,

    I'm hoping you can assist once more now evertything is clearer.

    The offer I have on the table is 48,500 per annum. They are suggesting that they are happy for me to split that up however I want. I.e. if I want 4000 as car allowance, it would revert to 44,500 salary with 4000 car allowance.

    My question now really is, what difference is that? Isn't car allowance still considered "taxable income" and as such it'd be treated no different to salary?

    Furthermore, if I took all of this as salary, and then took out a car on HP for example, what would I be looking to claim back from Gov.UK in terms of mileage (assuming company pays nothing)?
    • Dazed and confused
    • By Dazed and confused 17th Apr 18, 4:21 PM
    • 3,289 Posts
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    Dazed and confused
    • #9
    • 17th Apr 18, 4:21 PM
    • #9
    • 17th Apr 18, 4:21 PM
    Yes car allowance is really just extra salary as far as tax is concerned but it may differ for pension purposes.

    Pretty sure previous posters on here have said car allowance isn't part of their salary for pension purposes so you might end up with a pension (or pension contributions) based on 44,500 rather than 48,500.

    No doubt there's more to consider but that is one basic difference which might apply.
    • ChuckMountain
    • By ChuckMountain 18th Apr 18, 3:13 PM
    • 177 Posts
    • 64 Thanks
    ChuckMountain
    Yes car allowance is really just extra salary as far as tax is concerned but it may differ for pension purposes.

    Pretty sure previous posters on here have said car allowance isn't part of their salary for pension purposes so you might end up with a pension (or pension contributions) based on 44,500 rather than 48,500.

    No doubt there's more to consider but that is one basic difference which might apply.
    Originally posted by Dazed and confused
    Yes I would agree it can make a difference on your pension contributions and theirs if they match yours.

    My car allowance was not included for pension purposes.

    The other thing was my bonus which was x% of base which did not include car allowance so would have been lower.

    With the new rules coming in wouldn't it better to take the full pay as straight salary albeit you would have a little bit more pension contribution but know exactly where you stand from a tax point of view.
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