Company Car v Cash Alowance
Discussion
Ok, starting a new job next week, been offered a company car (some nice stuff on it!) or £6000 cash allowance.
Anybody been through this will any good advice? Think I'm going for the cash but not sure if I still get "free" fuel or not.
PS just noticed I speellttt the title wrong, good job they are not hiring me for me speeling.
>> Edited by darrent on Monday 16th January 16:46
Anybody been through this will any good advice? Think I'm going for the cash but not sure if I still get "free" fuel or not.
PS just noticed I speellttt the title wrong, good job they are not hiring me for me speeling.
>> Edited by darrent on Monday 16th January 16:46
It used to be that if your annual business milage was less than 10,000 the taxation on the company car outweighed the benefits of taking the cash, buying your own vehicle and claiming the milage allowance.
Haven't had anything to do with company car tax for a few years now, so you might want to double check.
I do know that if I was in the position of low milage/cash allowance/company car choice that I'd seriously look at a good, simple, all weather classic.
(My tweeds and loafers are on order)
Haven't had anything to do with company car tax for a few years now, so you might want to double check.
I do know that if I was in the position of low milage/cash allowance/company car choice that I'd seriously look at a good, simple, all weather classic.
(My tweeds and loafers are on order)
If you need to do the maths properly there's a web site called smmt?? or something like that.
However, as a rule if you're sensible about the car (cost £20k RSP) and you choose a sensible engine from a tax perspective (usually ends up having to go for a Diesel) so 20% taxable benefit and are 40% tax payer the monthly cost out of your will be; 20,000x20%x40%/12=£133.33 per month.
If you're not sensible about the engine it becomes; 20,000x35%x40%/12=£233.33 per month.
With no other running costs.
Dependant upon package as to whether you get your "private mileage" paid and what the company classes as private mileage.
you will have to pay income tax on the £6000 and national insurance so that will reduce your net monthly increase to only £245 per month. However, most companies pay a little over the actual pence per mile for business mileage which contributes to your running costs.
Here's where my knowledge gets a bit grey; You can also claim tax allowances for business mileage upto £0.28 (I think but you'll need to check the value). Therefore, if your company only pays you £0.15 per mile you claim the balance (£0.13) back in your tax return.
If you assume you do 15,000 miles per year and your employer only pays you the what it costs per mile for fuel (£0.15) then you claim the £1950 back from the dreaded tax man that would equate to about another £162.50 per month.
So, you'd get £407.50 per month to fund the car, depreciation, insurance, servicing and all other costs.
I've had a company car for the past 16 years and slowly seen the £ benefit eroded but stayed with it because I was doing 40/50,000 per month and knew when the cars go back they were (almost) dead and therefore if they were mine I'd be getting very little for them.
However, my mileage has now reduced to about 10,000 and I've opted out and bought a Focus ST!!!
Hope this helps
However, as a rule if you're sensible about the car (cost £20k RSP) and you choose a sensible engine from a tax perspective (usually ends up having to go for a Diesel) so 20% taxable benefit and are 40% tax payer the monthly cost out of your will be; 20,000x20%x40%/12=£133.33 per month.
If you're not sensible about the engine it becomes; 20,000x35%x40%/12=£233.33 per month.
With no other running costs.
Dependant upon package as to whether you get your "private mileage" paid and what the company classes as private mileage.
you will have to pay income tax on the £6000 and national insurance so that will reduce your net monthly increase to only £245 per month. However, most companies pay a little over the actual pence per mile for business mileage which contributes to your running costs.
Here's where my knowledge gets a bit grey; You can also claim tax allowances for business mileage upto £0.28 (I think but you'll need to check the value). Therefore, if your company only pays you £0.15 per mile you claim the balance (£0.13) back in your tax return.
If you assume you do 15,000 miles per year and your employer only pays you the what it costs per mile for fuel (£0.15) then you claim the £1950 back from the dreaded tax man that would equate to about another £162.50 per month.
So, you'd get £407.50 per month to fund the car, depreciation, insurance, servicing and all other costs.
I've had a company car for the past 16 years and slowly seen the £ benefit eroded but stayed with it because I was doing 40/50,000 per month and knew when the cars go back they were (almost) dead and therefore if they were mine I'd be getting very little for them.
However, my mileage has now reduced to about 10,000 and I've opted out and bought a Focus ST!!!
Hope this helps
If you are using your own car for business purposes, your employer can pay you up to 40p per mile (up to 10,000 business miles) without you being taxed on that income. After 10,000 business miles, the allowanble amount drops to 25p per business mile.
If your employer pays you below these rates, you can make a claim for tax relief on the difference to the tax man.
In addition, for every business trip in which you take a work collegaue as a passenger in your car, you can claim an additional 5p per mile on the 40p and 25p rates.
If your employer pays you below these rates, you can make a claim for tax relief on the difference to the tax man.
In addition, for every business trip in which you take a work collegaue as a passenger in your car, you can claim an additional 5p per mile on the 40p and 25p rates.
Look at www.cashorcar.co.uk/
Decision depends on: how many miles you are going to do for business and private, what sort of restrictions they may place on you if you opt out (ie must have 4 doors/seats etc) plus what rate you can claim fuel.
I opted out a few years back when i was doing virtually no business miles. Opted back in when a job change meant 40k miles a year, but chose a diesel mondeo which cost very little in tax (whilst also allowing me to claim at a reasonable rate ppm 'cos it was a 2.2 plus it was not slow ~295lbf torque..) also the 45mpg was welcome on long weekend trips visiting friends.
Job situation changed again recently so the car went back and i'm opted out again.
6k per year is a good allowance but remember it has to pay for ALL your running costs incl depreciation, insurance, servicing, tyres etc. and your insurance needs to cover you for class 1 business ie to and from work AND visiting clients.
Decision depends on: how many miles you are going to do for business and private, what sort of restrictions they may place on you if you opt out (ie must have 4 doors/seats etc) plus what rate you can claim fuel.
I opted out a few years back when i was doing virtually no business miles. Opted back in when a job change meant 40k miles a year, but chose a diesel mondeo which cost very little in tax (whilst also allowing me to claim at a reasonable rate ppm 'cos it was a 2.2 plus it was not slow ~295lbf torque..) also the 45mpg was welcome on long weekend trips visiting friends.
Job situation changed again recently so the car went back and i'm opted out again.
6k per year is a good allowance but remember it has to pay for ALL your running costs incl depreciation, insurance, servicing, tyres etc. and your insurance needs to cover you for class 1 business ie to and from work AND visiting clients.
Depends if you want to like driving a car you choose and you can move from a rep mobile.
A few years ago this is what I did.
Bought a 3 yr old saab convertible for 16k with a loan over 3 years at about £500 a month for the loan.
insurance was £60 a month
tax, servicing etc was £125 a month.
total outgoings were £685 a month.
received the £6,000 a year allowance in the wages or £500 a month which is £250 after tax and NI.
Claimed back £2,000 a year from the inland revenue or £166 a month after the first year of ownership.
By not having a company car means you will have about £230 more in your wages.
So incomings were £646 a month so I needed to find £39 a month to have a car of my choice.
At the end of the 3 year period sold it for 7k. So a clear profit of over 5.5k
A few years ago this is what I did.
Bought a 3 yr old saab convertible for 16k with a loan over 3 years at about £500 a month for the loan.
insurance was £60 a month
tax, servicing etc was £125 a month.
total outgoings were £685 a month.
received the £6,000 a year allowance in the wages or £500 a month which is £250 after tax and NI.
Claimed back £2,000 a year from the inland revenue or £166 a month after the first year of ownership.
By not having a company car means you will have about £230 more in your wages.
So incomings were £646 a month so I needed to find £39 a month to have a car of my choice.
At the end of the 3 year period sold it for 7k. So a clear profit of over 5.5k
I took the cash but only because it means that i can change cars when I want. To be honest it doesn't make much difference over 3 years if you work it out. So long as there are no expensive breakdowns....
Alternatively, get a "cheap" company car, and take the cash difference, and have something nice in the garage for weekends. Wife has a Clio deisel, which I would be quite happy to use instead of the Discovery, so long as the Noble was there for weekends.
I did have a company Clio 172 which was supprisingly cheap, and did at least 40 MPG, with cash back, and good fun on track, not that you'd ever take a company car on a track day 9even if it did have full maintanance contract)....
Alternatively, get a "cheap" company car, and take the cash difference, and have something nice in the garage for weekends. Wife has a Clio deisel, which I would be quite happy to use instead of the Discovery, so long as the Noble was there for weekends.
I did have a company Clio 172 which was supprisingly cheap, and did at least 40 MPG, with cash back, and good fun on track, not that you'd ever take a company car on a track day 9even if it did have full maintanance contract)....
I opted out a 3 years ago because the grubby chancelor was stiffing me on the tax, (at the time a 2.5 V6 petrol engine, on £23k car) as soon as the emissions criteria came in I was paying over the odds. I worked the sums out at the time and if I recall I could spend up to £500 per month and be no worse off financially in having my own car.
Over 3 years that equated to £18k and I would have had nothing to show for it if I stayed with the company car route. What it's meant for me is freedom about worrying about emissions to reduce my tax and the knowledge I'll have equity in whatever car I happen to be driving.
Over 3 years that equated to £18k and I would have had nothing to show for it if I stayed with the company car route. What it's meant for me is freedom about worrying about emissions to reduce my tax and the knowledge I'll have equity in whatever car I happen to be driving.
I'd take the allowance and get your own car, I had company cars for years but opted out a couple of years ago when the tax got too punitive (emissions based) on anything 'decent', now I take the 40p/mile for the first 10k then 25p afterwards - and the same for the wife's car.
I have to say it is my own company and so was free to chose cars etc but I'm definately much better off now and Greedy Gordon gets less too....
alternatively you could get a real 'cheap' company car for work and a weekend toy, which might be worth looking at?...
I have to say it is my own company and so was free to chose cars etc but I'm definately much better off now and Greedy Gordon gets less too....
alternatively you could get a real 'cheap' company car for work and a weekend toy, which might be worth looking at?...
softtop said:
I've had a company car for the past 16 years and slowly seen the £ benefit eroded but stayed with it because I was doing 40/50,000 per month
They say no rest for the wicked!!
I'll say. That's over 2,000 miles per working day. At an minimum average speed of 83mph assuming no sleep!
Even now he is doing 500 miles per day. I have done that in a day and it meant about 10 hours in the car.
Shurely shome mishtake....
Something to think about, at least in the States if you are offered a company car the job will involve quite a bit of driving, particularly since this is a new job for you consider using "their" car, to start with, then consider taking the cash allowance later.
Aspects of the job may well involve subjecting the car to things that you dont' want to subject "your" car to.
That and it's a perk to have a car available to you that you don't have to look after or worry about.
Having said that, *if* you have a free hand to select whatever you want as a "company" car, you can come out ahead financially. On the rare occasions I can claim mileage on my personal "beater" car, I make a pretty good profit
Aspects of the job may well involve subjecting the car to things that you dont' want to subject "your" car to.
That and it's a perk to have a car available to you that you don't have to look after or worry about.
Having said that, *if* you have a free hand to select whatever you want as a "company" car, you can come out ahead financially. On the rare occasions I can claim mileage on my personal "beater" car, I make a pretty good profit
hendry said:
I've had a company car for the past 16 years and slowly seen the £ benefit eroded but stayed with it because I was doing 40/50,000 per month
They say no rest for the wicked!!
I'll say. That's over 2,000 miles per working day. At an minimum average speed of 83mph assuming no sleep!
Even now he is doing 500 miles per day. I have done that in a day and it meant about 10 hours in the car.
Shurely shome mishtake....
OK I meant per annum!!!
DOH!!
My allowance is similar to yours (a few hundred more). I only do around 10K all-in per annum. I opted out to get choice of car.
I bought a brand new Clio Sport from a car supermarket. It cost £12K and I got around £7.5 back after three years. It never cost me a bean except servicing, insurance, fuel and tyres. Cost to own the car was therefore less than £5K for three years.
I reckon the first car you buy won't work out much cheaper in monthly costs but after, say, a three year term you'll have the residual value as a bonus. When you put this towards your next car, things become cheaper.
Incidentally, when comparing your salary with or without the allowance it is worth bearing in mind that whilst you will pay tax on the £6k, you'll not be paying for the car/fuel benefits. As a rough rule of thumb, you'll see pretty much all of that £6k in your take-home.
I bought a brand new Clio Sport from a car supermarket. It cost £12K and I got around £7.5 back after three years. It never cost me a bean except servicing, insurance, fuel and tyres. Cost to own the car was therefore less than £5K for three years.
I reckon the first car you buy won't work out much cheaper in monthly costs but after, say, a three year term you'll have the residual value as a bonus. When you put this towards your next car, things become cheaper.
Incidentally, when comparing your salary with or without the allowance it is worth bearing in mind that whilst you will pay tax on the £6k, you'll not be paying for the car/fuel benefits. As a rough rule of thumb, you'll see pretty much all of that £6k in your take-home.
When I was in this situation I already had a car (as I suspect that you do) I decided to keep running that same car and take the cash. To my mind it comes down to a couple of things.
If you do a huge amount of personal miles then the company car is a benifit (i.e. long drive to work or hobbys that see you drive a few hundred miles every weekend) as the company car takes the flak.
You do a huge amount of business miles then the car allowance may not pay the depreciation on your choice of personal car, the more special a car is the more the mileage will make a difference.
If you have to visit rough areas where damage from rough ground (or rough people) then the company car can take the flak.
Like some others have suggested I thought about getting the cheapest car that was OK on the motorway as a company car and taking the rest in cash if your company offer this it might be good plan.
Now I work from home the only place I go to are airports for which I get a taxi so its just salary now to be honest.
Oh one other thing if you have kids, young ones wreck cars so let them wreck someone elses of if you have older ones and the company will insure them (very slim chance) they can have the use of it with out you needing to worry.
If you do a huge amount of personal miles then the company car is a benifit (i.e. long drive to work or hobbys that see you drive a few hundred miles every weekend) as the company car takes the flak.
You do a huge amount of business miles then the car allowance may not pay the depreciation on your choice of personal car, the more special a car is the more the mileage will make a difference.
If you have to visit rough areas where damage from rough ground (or rough people) then the company car can take the flak.
Like some others have suggested I thought about getting the cheapest car that was OK on the motorway as a company car and taking the rest in cash if your company offer this it might be good plan.
Now I work from home the only place I go to are airports for which I get a taxi so its just salary now to be honest.
Oh one other thing if you have kids, young ones wreck cars so let them wreck someone elses of if you have older ones and the company will insure them (very slim chance) they can have the use of it with out you needing to worry.
I get a car allowance but have to say that given the choice I would take a company car.
The reason is that I have to drive 120 miles to get to work and back each day. This means that I end up doing 25K+ p/a. I looked into various PCP type deals around and I couldn't get much due to the depreciation associated with the high annual milage.
If you don't do high (private?) mileages you can can get some nice cars with your budget.
The reason is that I have to drive 120 miles to get to work and back each day. This means that I end up doing 25K+ p/a. I looked into various PCP type deals around and I couldn't get much due to the depreciation associated with the high annual milage.
If you don't do high (private?) mileages you can can get some nice cars with your budget.
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