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  • FIRST POST
    • CeePeeBee
    • By CeePeeBee 17th Apr 18, 2:10 PM
    • 78Posts
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    CeePeeBee
    Car Allowance & Mileage Question
    • #1
    • 17th Apr 18, 2:10 PM
    Car Allowance & Mileage Question 17th Apr 18 at 2:10 PM
    Hi all,

    I'm currently employed on 42k pa with a BMW 1 Series (2016 1.6) company car. The benefit of the company car is that I obviously get a new car, company mileage paid for (thanks to my work from home contract), insurance and breakdown covered off etc and only have to pay the BIK tax %'age.

    I've applied for a new job, and they are offering the following: 48.5k pa which they are happy for me to split however I wish (i.e. take 5000 as car allowance if I wanted, leaving 43.5k pa as salary), and I'm a bit lost at whether I'm going to be losing out or not.

    I know a lot of this depends on the car I choose but my specific questions are as follows (thanks in advance):
    1. If I split my salary into "basic + car allowance" does it make ANY difference in terms of tax or other implications? Wouldn't it be easier to have as just salary all in?
    2. If I continue to have a work from home contract, can I claim all my mileage for business use back from the Gov? I know that I could claim the tax difference between what the company offered (say 11p) and the Gov rate (45p?) previously. Still the case?
    3. I'm trying to find the break point for a car cost so that I can work out at what point I'll lose out, so I can work back from there for a car cost (hire purchase?) plus insurance, etc. Any ideas?

    I just need a few pointers here as I've never made this transition before. Moving from a car allowance to a company car made more sense as I paid BIK, and that was it - everything else was dealt with. Going the other way, with a new company is scary. I'm not even sure what questions to ask on that to make sure I'm not losing out.

    Many thanks in advance
Page 1
    • Le_Kirk
    • By Le_Kirk 17th Apr 18, 2:15 PM
    • 3,207 Posts
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    Le_Kirk
    • #2
    • 17th Apr 18, 2:15 PM
    • #2
    • 17th Apr 18, 2:15 PM
    With your new job will you have to buy a car? Are you expecting to use the car allowance to fund this car, therefore monthly payments?
    • CeePeeBee
    • By CeePeeBee 17th Apr 18, 2:28 PM
    • 78 Posts
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    CeePeeBee
    • #3
    • 17th Apr 18, 2:28 PM
    • #3
    • 17th Apr 18, 2:28 PM
    Hi Le_Kirk

    Yes, I will have to lease or HP one with this new job.
    • fatrab
    • By fatrab 17th Apr 18, 3:11 PM
    • 908 Posts
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    fatrab
    • #4
    • 17th Apr 18, 3:11 PM
    • #4
    • 17th Apr 18, 3:11 PM
    1. If I split my salary into "basic + car allowance" does it make ANY difference in terms of tax or other implications? Wouldn't it be easier to have as just salary all in? You'll still pay the same in tax either way. If you need the higher salary (for mortgage applications for example) or a lower salary (for CSA payments etc) these may be affected depending on how you split the amounts.
    2. If I continue to have a work from home contract, can I claim all my mileage for business use back from the Gov? I know that I could claim the tax difference between what the company offered (say 11p) and the Gov rate (45p?) previously. Still the case? You can still claim the relief on the difference between what your employer pays and the 45p up to 10,000 miles, 25p thereafter (I'm not going to go into whether or not you should be claiming business mileage from "home", that's another argument!)
    3. I'm trying to find the break point for a car cost so that I can work out at what point I'll lose out, so I can work back from there for a car cost (hire purchase?) plus insurance, etc. Any ideas? Not an easy calculation, last time we did this (as a collective of employees) we based it on 4500/annum and 18000miles/annum in a 1 year old diesel Ford Focus, above this annual mileage it became more sensible to take the company car instead of the allowance.
    Last edited by fatrab; 17-04-2018 at 3:16 PM.
    You can have results or excuses, but not both.
    Challenge - be 14 Stone BY XMAS!

    • CeePeeBee
    • By CeePeeBee 17th Apr 18, 3:28 PM
    • 78 Posts
    • 1,036 Thanks
    CeePeeBee
    • #5
    • 17th Apr 18, 3:28 PM
    • #5
    • 17th Apr 18, 3:28 PM
    Hey fatrab

    Thanks for your info - that's a great start. I would LOVE a company car, however the prospective organisation no longer offers them due to the annoying amount of short leases they ended up paying out when people left, hence the car allowance.

    I'm already going to be earning 6k pa more, so I suppose as long as I can't purchase everything I need (car, insurance etc) within that I at least won't be any worse off.

    So, as you seem to know a bit about this, somebody once mentioned to me that there was a "private" alternative to company cars that in affect work in the same way. Is that true? If so what option is it?

    If I can compare like for like then that's a starter.

    I'k just a bit lost at the moment. I'm looking at cars around 300-350 per month but I've no idea of the real world implication currently.
    • Aylesbury Duck
    • By Aylesbury Duck 17th Apr 18, 3:34 PM
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    Aylesbury Duck
    • #6
    • 17th Apr 18, 3:34 PM
    • #6
    • 17th Apr 18, 3:34 PM
    The other consideration is pension payments. If you take some of the package as car allowance, your percentage pension contribution - and more importantly that from your employer - will be based on the salary element. e.g. if your new employer pays a 5% contribution into your pension, you are missing out on 250 p.a. of pension contributions from your employer on the 5k that is taken as car allowance. Not a massive sum admittedly but still worth factoring in when you weigh up the options.
    • fatrab
    • By fatrab 17th Apr 18, 3:42 PM
    • 908 Posts
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    fatrab
    • #7
    • 17th Apr 18, 3:42 PM
    • #7
    • 17th Apr 18, 3:42 PM
    I've been on company car allowance for 10 years and I've never heard of a "private" scheme. What they may be referring to is where the company pays you 45p/mile flat rate. My wife gets that through her employer and I know it's commonplace in local authority, NHS etc. If you do high miles it really pays!

    Otherwise I'm afraid I can't help on that one.

    I'd aim low to begin with in terms if what car you buy as your first year's insurance might be a little high. I know from experience of fellow employees who have handed back their cars and taken the allowance, only to find that not many insurers take into consideration your driving history vs lack of no claims bonus.
    Last edited by fatrab; 17-04-2018 at 4:09 PM.
    You can have results or excuses, but not both.
    Challenge - be 14 Stone BY XMAS!

    • sheramber
    • By sheramber 17th Apr 18, 3:46 PM
    • 5,253 Posts
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    sheramber
    • #8
    • 17th Apr 18, 3:46 PM
    • #8
    • 17th Apr 18, 3:46 PM
    You do get the cost of business mileage back. You get tax relief only.

    e.g 10,000 miles @ 45p = 4500. 00 ( less any payment your employer has made) @ 40% or 20% depending on your tax rate.
    • CeePeeBee
    • By CeePeeBee 17th Apr 18, 4:09 PM
    • 78 Posts
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    CeePeeBee
    • #9
    • 17th Apr 18, 4:09 PM
    • #9
    • 17th Apr 18, 4:09 PM
    Hi all,

    @sheramber - yes I understand that - thanks for mentioning it though.

    @fatrab - I suppose I'm struggling to understand the different options (PCH, HP, etc) and what I'll need to be buying on top of that (i.e. insurance, breakdown, etc)
    • fatrab
    • By fatrab 17th Apr 18, 4:17 PM
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    fatrab
    PCP/PCH is essentially a lease with a deposit at the start, a set number of payments (24 or 36 months possibly) and a balloon payment at the end if you choose to keep the car (on some plans you may not have the option to buy at the end). If you're doing high miles it's probably not a good option. Personally I don't like them at all but it's down to whatever works best for you.

    HP you pay a deposit and finance the balance. When the last payment is made you own the car. Watch out for high interest rates.

    Breakdown cover - Autoaid.

    Insurance, just follow the advice on MSE's main page. Best to find a few cars that you fancy then run quotes on all of them, see what's coming up best value. Remember to add business use.
    Last edited by fatrab; 17-04-2018 at 4:27 PM.
    You can have results or excuses, but not both.
    Challenge - be 14 Stone BY XMAS!

    • fatrab
    • By fatrab 17th Apr 18, 4:20 PM
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    fatrab
    Make sure that you're new employer doesn't have a CO2 cap on what car you can buy for company use. I've seen this with a few companies recently, just in case you need to stick to cars under 120g/km for example.
    Last edited by fatrab; 17-04-2018 at 4:23 PM.
    You can have results or excuses, but not both.
    Challenge - be 14 Stone BY XMAS!

    • CeePeeBee
    • By CeePeeBee 17th Apr 18, 10:23 PM
    • 78 Posts
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    CeePeeBee
    What bugs me is that I currently pay around 1500 in BIK tax for the 1 series BMW I have as a company car now. Even being paid c. 6k pa more, I can't find a way of getting a similar car for the same money and still coming out on top. c. 300+ for either HP, PCH, or purchase with finance, plus insurance etc...get's me right back where I am now...
    • fatrab
    • By fatrab 18th Apr 18, 7:06 AM
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    fatrab
    Are you sure that's all you pay in BIK tax? Seems awfully low, I could be wrong but I'd have thought you'd have been closer to 4000.


    Maybe ask over in the Tax section of the forum and get some clarity on that?
    You can have results or excuses, but not both.
    Challenge - be 14 Stone BY XMAS!

    • CeePeeBee
    • By CeePeeBee 18th Apr 18, 8:25 AM
    • 78 Posts
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    CeePeeBee
    Hi fatrab,

    The BIK rating on the car I currently have (1.6 BMW 1 series) is 4640 so I'd be paying either around 930 or 1850 depending on whether I was lower or higher tax rate payer.

    As my salary is sitting at 42200 currently, I'm lower.

    Any advice on the car front in terms of what might be best (HP, PCP, etc) would be most beneficial as currwntly I can't seem to get an okay car for work, with insurance, for less than around 350 which is approximately what the salary increase puts on my net monthly take home which means I'm at best, the no worse off. Makes it hard to move for this package (which is fine) so I just want to be sure my maths stacks up and I've considered all the options.

    Thanks for your help so far!
    • fatrab
    • By fatrab 18th Apr 18, 8:44 AM
    • 908 Posts
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    fatrab
    Other than buying a cheaper car I don't really know what to suggest.

    I receive 4950/annum. At the moment my car payment is 402/month but I chose a car that I wanted as opposed to just picking the cheapest suitable car. My Insurance is just under 400.

    I'm changing to a car which will be under 200/month and slightly cheaper to insure so I'll be making a little profit from the allowance but not much.
    You can have results or excuses, but not both.
    Challenge - be 14 Stone BY XMAS!

    • fatrab
    • By fatrab 18th Apr 18, 8:47 AM
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    fatrab
    Bear in mind, with the car allowance you will own the car eventually. With a company car paying BIK you never own anything. Think about what the car will be worth in 2 or 3 years time and work that into the calculations.


    I don't know anyone who thought they were worse off after switching to car allowance.
    You can have results or excuses, but not both.
    Challenge - be 14 Stone BY XMAS!

    • Bigphil1474
    • By Bigphil1474 18th Apr 18, 8:57 AM
    • 875 Posts
    • 379 Thanks
    Bigphil1474
    OP, the 'private' scheme you refer to might be what I know as grey fleet. Essentially, you provide your own car and you claim back an allowance/mileage from your employer. I work for local government and I provide my own car and get an annual allowance of 963 pounds plus 40.9p per mile driven. The 'profit' is taxable - I only do about 3000 work miles a year though, as my driving is all local. For me, doing 3000 miles, I receive 2190, but am entitled to 1,350 tax free - so the taxable amount is 840 which comes off my tax free allowance. The more miles I do, the less the profit.
    If you are based at home, then that is your normal work place. Our company rules are that you can claim any work miles from your normal work place to a job, and back. Unfortunately, they don't recognise my home as my normal workplace, but in your case they may? Check with HR.
    In terms of your salary, I would have thought wage + car allowance is best - some of your car allowance will be tax free, if they pay less than 45p a mile, and your wage would be up to 20% tax. Whereas all of the top bit of your wage will be 40% tax if it was wage only?
    • rob7475
    • By rob7475 18th Apr 18, 10:59 AM
    • 303 Posts
    • 183 Thanks
    rob7475
    If they are offering to include your car allowance in your basic salary, I'd accept that rather than splitting it. The tax implications are exactly the same - it's all classed as taxable income. However, if your car allowance is a separate line item on your payslip, you miss out on pension contributions, annual % salary increases, overtime payments etc.

    With a car allowance, you may be able to keep a car longer. Our company policy is we can keep a car until it's 8 years old. My current car was a 25k SUV bought at 6 month old for 17.5k. If I keep that till it's 8 year old, it will have cost me 200 per month to buy the car + insurance, tax, servicing etc. I get a 5k car allowance so after tax I clear about 335 per month. That leaves me 135 per month after the purchase price to cover servicing, insurance etc which is more than enough. Finally, I have the resale value of my 8 year old car - 8 year old versions of my car currently sell for between 5-6k..

    As you can see, there's lots to take into consideration but car allowance usually works out better depending on the company's policy on how long you can keep you car.
    • CeePeeBee
    • By CeePeeBee 18th Apr 18, 2:34 PM
    • 78 Posts
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    CeePeeBee
    Hi Rob,

    There is no option - car allowance is what this new job is offering and yes, I agree that no split is best.

    I can only find a car for around 300-350 that suits sales meetings, and then I have insurance on top of that, as well as mileage. How did you purchase your car? HP, PCP? I'm just trying to understand how best to deliver this.

    Currently I'm struggling to make it work in this new role so any help would be great.
    • fatrab
    • By fatrab 19th Apr 18, 8:20 AM
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    fatrab
    Are you looking at cars you want or cars that are suitable to the job? If you want a new-ish BMW 116 it's going to cost twice as much as a 2015 Vauxhall Insignia or Ford Focus.

    If you want to make money from the car allowance you need to make sacrifices.

    There are 2015 Insignias and Focus' for under 9k. That's just over 200/month over 48 months.

    Have you looked at bank loans instead of HP? My bank currently offers 3.1% on loans between 7500 and 15000. This would be far cheaper in the long run than HP or PCP
    Last edited by fatrab; 19-04-2018 at 8:22 AM.
    You can have results or excuses, but not both.
    Challenge - be 14 Stone BY XMAS!

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