Company car or car allowance

Discussion in 'Finance, Property, Law' started by drain_sniffer, Mar 1, 2013.

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  1. After a bit of advice from please.

    I commute 600 miles a week for work, putting the wear and tear on my car. I have approached the boss who has agreed to provide either a company car or fuel allowance. I appreciate a car is taxable as a benefit in kind, but if I went for a golf or kia ceed its only about £80. I also have to travel about a bit, for which I currently get 45p a mile.

    My thoughts are that a car would be the better option as it saves me paying for a second car for the wife and I can pile the miles onto a company motor, but would I pay tax and NI on a monthly car allow?

    Anyway, any advice on car v allowance greatfully recieved
  2. I don't know much about it but I do know you're taxed on the list price, your company may buy cars at a big discount but you're taxed on list price.
  3. As Jarrod said, regardless of the age of the vehicle and it's market value, you pay tax on the list price (including any extras you/the company opted for). You don't pay NI on it. If you opt for the allowance, you pay tax on that.

    Which is better? In my experience, an allowance is rarely sufficient the costs of buying/leasing a car, MOT and road fund licence, insurance, servicing, and new tyres. A company car scheme should include all those elements (which, incidentally, you don't pay tax on even though the company/company scheme pays for them). If you use your own car, you have to keep a record of total annual running costs, total mileage allowance received, total business mileage, total personal mileage, and apportion running costs accordingly. You may then be able to reduce your tax by claiming the excess business cost against tax. 'Easy' if you are on self-assessment, not so easy if you are PAYE, as you have to submit a form (R14?).

    In theory HMRC will then send you a cheque about 6 months later. Or simply apply it to your tax code for the following year. And then deem your tax affairs 'complicated' and move you onto self-assessment anyway!

    I was travelling 1000 miles per week to and from work, and initially had opted for the allowance (as I had changed jobs mid-tax year, and in the previous role I was home based so *every* mile was business mileage). I changed to a car - yes, it was higher tax, but the reduced running costs sufficiently offset the higher tax and made it cheaper for me overall.

    Your mileage may vary (excuse the pun!)
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  4. Basic rule of thumb, if you are doing more than 15000 business miles a year take the company car, but there is quite a bit to think about, my example: The tax man will reduce your annual tax allowance by a sum calculated using the carbon emmission and the car's list price (not what is paid for it or even it's value as it depreciates) So for my poxy Mazda 6 I have my tax allowance reduced by £4890, which means I pay 40% of £4890 per year which is £1956 or £163 per month. If I took the car allowance of £6500 pa I'd be taxed and NI'd on it but would see the return of my allowance back to the full amount, that would give me £455 per month to cover the cost of the car and its running cost - tax, insurance, tyres, service etc I can also claim back the tax on the difference between HMRC fuel rates and those paid out by my company, HMRC fuel rate is £00.45 per mile my cmpany pay £00.15 per mile for a 2 litre diesel, 40% of 30p is 12p and I do just over 10,000 business miles so that is at least £1200,00 per year to add to the equation. That means that I'm getting my own brand new BMW 320D M Sport in 3 months when my car is up for renewal and my company are effectively going to pay for it in the end :)
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  5. My partner has a company car and it causes much less stress that its all included.
    If someone dents his car it's a matter of fact thing if someone dents mine it's £250 excess. When my car needs servicing I'm ready to lose the plot over the cost. Insurance causes me a few hours and phone on the Internet. Finding I need tyres replacing at 20,000 miles sends me into a rage and complaints to anyone whose job it is to justify why it's acceptable.
  6. What do you want to be seen driving in? If you wouldn't be seen dead in a car older than 3 years, the company car beats depreciation. If you're happy to buy a 3rd hand 4 year old that you'll drive until it packs up and then repeat the process, take the mileage.

    Mileage allowance is great unless you're paying for depreciation.

    When you say that you're driving 600 miles a week, I presume that you're home-based by HMRC definition. If not, you'll pay tax on your mileage payments. If home-based, to remain tax-free the 45p per mile is only for the first 10,000 miles (which you'll exceed after 4 months) after which you'll either drop down to 40p per mile or you'll be taxed on the 5p per mile, depending on what your company has written into your T&Cs.

    (Figures from memory)
  7. Something else. If you're a smoker, take the mileage allowance and puff away to your heart's content.
  8. Company car, you are going to put at least 24000 mile of personal mileage on that car before you even get to work each year and start racking up business miles: tyres, service, depreciation, breakdown cover, damaged paintwork,etc, unless the allowance very substantial you'll never come close to breaking even.
  9. Car allowance not treated any different to salary from a Tax and NI perspective. At least the business/private mileage ratio doesn't change BIK calculation for a company car itself like it used to. Based on emissions regardless of mileage covered. In the old days you'd have been hammered for tax if the bulk was private mileage. Business mileage claim rate above 10,000 gets reduced or if you are paid the full rate above this threshold you start getting taxed on the claims paid above the 10K theshold.

    Useful links.

    HM Revenue & Customs: Company car and car fuel benefit calculator

    HM Revenue & Customs: Tax relief for business mileage or fuel
  10. Thats what Im thinking. I have already forked out getting my current car ( Mondeo) fixed as the fuel pump and injectors went south ( a common thing in common rail diesels apparently) and so commuting in a company car would alleviate all that. The next question would be what type of car? To keep tax low as possible Im thinking golf or kia ceed but again happy to take on board options

    No horsemeat was used in the production of this post
  11. My partner is very happy with his Avensis estate but don't just think price think practicalities. You don't want to be squashed in a small car for all those miles.
  12. Golf seems to be the most popular company car in our place, comfortable, practical and reliable as well as being good on the motorway with a reasonable comfort level, there are also a fair sprinkling of insignias. I huess a big part of it will be how much your employer is prepared to spend?