Company car allowance n00b advice (probably boring content)
Discussion
Hi all,
I've been offered a new job which comes with a £400 pcm car allowance. No previous job I've had has offered either a company car or an allowance, so the whole area is a bit of a blind spot for me, and was hoping for some advice - specific queries below...
1) I'm assuming the £400 pcm will be paid as normal salary and as such will be taxed. I'm a high rate tax payer, so I've made the assumption that the £400 will be subject to the following deductions, in this order - 6% (my pension), 12% (national insurance), 40% (income tax), making an amount 'in my pocket' of £198.53 (£400 - £24 - £45.12 - £132.35). Is this right?
2) Is there anyway some of this tax can be avoided? You don't seem to be able to get very much for that kind of figure. I have read (on the internet 'so it must be true') that if the new company has it's own lease scheme the amount I would have available would be closer to the original £400. Again, is this right?
3) If I take a lease, whether through the company and elsewhere, what happens if, for whatever reason, I leave the company mid way through the lease?
4) I'm assuming all normal costs (insurance, tax etc) would be payable by me
5) What happens with fuel? At the moment, if I use my personal car, I can claim 45p per mile. I understand this is a lot lower through a car allowance, but can be 'topped up' by claiming back through the tax man at the end of the year. Is this true, and would I have to fill out the dreaded self assessment form?
6) I'm anticipating doing c. 20K p.a. - 13K personal (including commuting), 7K business
7) Following on from the above, in tax terms (claiming mileage), can I count commuting as 'business' mileage?
8) If the assumptions in Q1 are true, I assume I can 'top up' this sum for something a bit better? I'd like something along the lines of a V50, base 3 series, skoda yeti or base freelander. I could get one with the full £400 pcm (see Q2), but the assumptions given in Q1 mean I would have about half that. In that case I'd probably prefer to just pocket the cash and keep what I've got now (08 Panda 100HP).
Sorry for the list - I have googled, but got a bit confused, and thought I'd seek advice on the specifics of my personal situation...
Cheers all!
1) Yes, it'll be taxed at 40%. (that's why I don't take the allowance!)
2) The only way to "avoid" the tax, is to take a company car that's leased by your employer. You'll still be taxed, but that'll be based on the cars co2 emissions and list price. i.e my Golf Bluemotion costs me £43 in tax a month.
3) If a vehicle is leased by your employer, you just hand it back when you leave. That's what I did about a year ago when I left my old job. My old company car when back to the head office and was given to another employee for the remainder of its lease. If you lease it yourself, you'll be stuck with it until the end of its lease.
4) If you take the allowance, then yes, all running costs are your responsibility. That's what the £400 is for. You don't have to buy/lease a new car, you probably could get away with using a 4-5 year old car.
5) Depends on the company. You'll either claim it back yourself or you may be given a fuel card.
6) Thats quite a low business mileage IMO?
7) If you commute to a permanent place of work (i.e an office/site) then no, that's not business mileage and cannot be claimed.
8) If you want to put more of your own money towards a car, that's up to you. I'd be tempted to use your Panda and pocket the £400 (before tax). Alternatively, get yourself a cheap reliable diesel snotter if you don't want huge mileage on your Panda.
Hope that answers your questions?
2) The only way to "avoid" the tax, is to take a company car that's leased by your employer. You'll still be taxed, but that'll be based on the cars co2 emissions and list price. i.e my Golf Bluemotion costs me £43 in tax a month.
3) If a vehicle is leased by your employer, you just hand it back when you leave. That's what I did about a year ago when I left my old job. My old company car when back to the head office and was given to another employee for the remainder of its lease. If you lease it yourself, you'll be stuck with it until the end of its lease.
4) If you take the allowance, then yes, all running costs are your responsibility. That's what the £400 is for. You don't have to buy/lease a new car, you probably could get away with using a 4-5 year old car.
5) Depends on the company. You'll either claim it back yourself or you may be given a fuel card.
6) Thats quite a low business mileage IMO?
7) If you commute to a permanent place of work (i.e an office/site) then no, that's not business mileage and cannot be claimed.
8) If you want to put more of your own money towards a car, that's up to you. I'd be tempted to use your Panda and pocket the £400 (before tax). Alternatively, get yourself a cheap reliable diesel snotter if you don't want huge mileage on your Panda.
Hope that answers your questions?
Thanks XDA for the comprehensive reply!
I was willing to pay £200 in BIK on a company car (I fancy treating myself), so in reality it ends up as £400 anyway.
Does make me wonder why allowances seem so popular though, unless the company has very specific restrictions on what you can have under a traditional scheme.
Re the business mileage, yes it is low, however is something of a guess based on interview - they asked me how much I would be willing to work away from home, my answer was 'very little (new baby) and the nearest site which I could work on during the day is only 5 miles from the office. The car is more of a perk than a necessity.
I was willing to pay £200 in BIK on a company car (I fancy treating myself), so in reality it ends up as £400 anyway.
Does make me wonder why allowances seem so popular though, unless the company has very specific restrictions on what you can have under a traditional scheme.
Re the business mileage, yes it is low, however is something of a guess based on interview - they asked me how much I would be willing to work away from home, my answer was 'very little (new baby) and the nearest site which I could work on during the day is only 5 miles from the office. The car is more of a perk than a necessity.
ChevronB19 said:
Thanks XDA for the comprehensive reply!
I was willing to pay £200 in BIK on a company car (I fancy treating myself), so in reality it ends up as £400 anyway.
Does make me wonder why allowances seem so popular though, unless the company has very specific restrictions on what you can have under a traditional scheme.
Re the business mileage, yes it is low, however is something of a guess based on interview - they asked me how much I would be willing to work away from home, my answer was 'very little (new baby) and the nearest site which I could work on during the day is only 5 miles from the office. The car is more of a perk than a necessity.
Personally, I'd go down the company car route. New car every 3 years, all servicing, maintenance, tax and insurance all taken care of.I was willing to pay £200 in BIK on a company car (I fancy treating myself), so in reality it ends up as £400 anyway.
Does make me wonder why allowances seem so popular though, unless the company has very specific restrictions on what you can have under a traditional scheme.
Re the business mileage, yes it is low, however is something of a guess based on interview - they asked me how much I would be willing to work away from home, my answer was 'very little (new baby) and the nearest site which I could work on during the day is only 5 miles from the office. The car is more of a perk than a necessity.
The allowance seems to be popular with mainly people in the 40% tax bracket? For anyone in the 20% tax bracket, a company car over the allowance is a no brainer. Also could be popular because alot of company schemes are quite restrictive, usually with the choice being only "eco" cars.
If you aren't doing many business miles, I'd just take the £400 and put it aside for any future car issues and use it for tyres etc.
XDA said:
Personally, I'd go down the company car route. New car every 3 years, all servicing, maintenance, tax and insurance all taken care of.
The allowance seems to be popular with mainly people in the 40% tax bracket? For anyone in the 20% tax bracket, a company car over the allowance is a no brainer. Also could be popular because alot of company schemes are quite restrictive, usually with the choice being only "eco" cars.
If you aren't doing many business miles, I'd just take the £400 and put it aside for any future car issues and use it for tyres etc.
I'm with you on that. I am a 40% tax payer, but I'd like the hassle free approach and my own cash to spend on my race car!The allowance seems to be popular with mainly people in the 40% tax bracket? For anyone in the 20% tax bracket, a company car over the allowance is a no brainer. Also could be popular because alot of company schemes are quite restrictive, usually with the choice being only "eco" cars.
If you aren't doing many business miles, I'd just take the £400 and put it aside for any future car issues and use it for tyres etc.
ChevronB19 said:
1) I'm assuming the £400 pcm will be paid as normal salary and as such will be taxed. I'm a high rate tax payer, so I've made the assumption that the £400 will be subject to the following deductions, in this order - 6% (my pension), 12% (national insurance), 40% (income tax), making an amount 'in my pocket' of £198.53 (£400 - £24 - £45.12 - £132.35). Is this right?
_gez_ said:
I doubt you'll have your pension deductions on your car allowance as it not your salary.
I missed that first point!!As _gez_ says, I believe your £400 allowance is only subject to one deduction which will be the 40%. I'm pretty certain that national insurance or your pension don't have anything to do with your car allowance.
Ah, sorry - I just automatically assumed it would come as part of normal salary and therefore subject to all usual deductions... Oh well, that gives me a bit more to play with then!
I assume the allowance would show up as a separate item on my payslip.
If I'm honest, I would truly love a freelander, which is c. 400 a month lease - if I have to add c. 200 a month for one for three years and end up handing it back I'm fine with that. Man Maths!
I assume the allowance would show up as a separate item on my payslip.
If I'm honest, I would truly love a freelander, which is c. 400 a month lease - if I have to add c. 200 a month for one for three years and end up handing it back I'm fine with that. Man Maths!
I think the mileage rate is fixed at 45ppm no matter what tax bracket you are in.
I'm on an allowance. I dont like it and wish I was on a company car scheme instead.
With an allowance, you get stuck with all the grief of maintaining car including paying the bills if they are big or small and getting to the right garage and everything else.
I'm on an allowance. I dont like it and wish I was on a company car scheme instead.
With an allowance, you get stuck with all the grief of maintaining car including paying the bills if they are big or small and getting to the right garage and everything else.
ChevronB19 said:
Ah, sorry - I just automatically assumed it would come as part of normal salary and therefore subject to all usual deductions... Oh well, that gives me a bit more to play with then!
I assume the allowance would show up as a separate item on my payslip.
If I'm honest, I would truly love a freelander, which is c. 400 a month lease - if I have to add c. 200 a month for one for three years and end up handing it back I'm fine with that. Man Maths!
I've never had the allowance (always gone for the company car), but I believe it would show up as a separate item on your payslip.I assume the allowance would show up as a separate item on my payslip.
If I'm honest, I would truly love a freelander, which is c. 400 a month lease - if I have to add c. 200 a month for one for three years and end up handing it back I'm fine with that. Man Maths!
I'd there any room for negotiation on the car allowance?
ChevronB19 said:
Does make me wonder why allowances seem so popular though, unless the company has very specific restrictions on what you can have under a traditional scheme.
For the employee - normally fewer restrictions, and if you're happy to run something a bit older (or for longer) than the normal 3 year company car lease then you can end up with some left over. It also avoids the hefty company car tax that anything not "eco" will cost them.For the company - far less in the way of fleet management to do, no cars coming back mid-lease from employees who've left, no money tied up at all.
Some will offer company cars, but only to those who do the kind of mileage to justify one (15k business miles pa in our case). You're right, £400pcm before tax doesn't get you a whole lot but arguably if it's not an essential for your job and only a third of your total mileage will be for business, why should the company be covering the entire cost of your car? If you didn't work for them you'd be funding it entirely out of your own pocket.
Hi guys,
I've been reading this thread (along with a few others!) and most people seem to say go for a car allowance rather than the car but I have a couple of questions as my situation is different, if anyone can help/guide me.
The job I am going for is probably going to pay £40k and I've been told that they will "more than likely offer a car". I know the company and they only ever buy A4's (& A6's for more senior managers) so it will be an A4 2.0tdi, maybe up to 3 years old as they have plenty around. They also provide a fuel card so I would have zero expenses other than the BIK/Tax
They do not offer car allowances so my question is, do I ask for £45k and not bother with the car? The extra 5k will likely net me £262 per month (using thesalarycalculator.co.uk) and looking online the car would probably cost me between £250-300 per month in tax.
Here are the figures I've been using so please tell me if I got it wrong!
With car;
Salary £40k = £2477.80 take home per month less BIK (say £300 for an older A4 to be safe!) = £2177.8 in my pocket and no car costs
Without car;
Salary £45k = £2740 take home per month, so £562 more which I would have available to buy and run a car.
As the extra salary would not be an "allowance" the company would have no say in how old a car I bought (I need to buy one as I don't currently live in the UK) although I wouldn't want to go older than say 4 years to try to keep reliability issues at bay.
I had a quick look on autotrader & found that to buy and run say a 08 Golf 1.4tsi (I know I could get something cheaper but quite fancied one :-p ) would be something like this;
Monthly payment £280 (£9000 over 3 years)
Road tax £12 (£135 pa)
Insurance £25 (£300 pa)
Fuel £180 (based on private miles of 12000 pa - say £40 per week) This is a large variable as I don't know where I'm going to live yet so the commute to work could be long or short depending on housing price/quality
That's almost £500 without servicing, repairs/breakdowns tyres etc. I currently put at least 1 pair of tyres on my car per year so that's another £15-20 per month.
That leaves approx £45 per month for the difference between a privately owned Golf and a company A4 with easy servicing, no worries about leaving "my baby" in a dodgy car park or at the airport etc. Also, that's only £10 per week and the fuel variable could swing that VERY quickly
I should also say that I will do little if any business miles as I will be office based (so no claim for using my own car).
It probably sounds like I've already talked myself into having the car but I really just want to check my figures & get some advice from people who have already done this. If my figures ARE right then I probably would go with the car, especially if they could provide a more efficient version to lower the tax (a friend informs me that it could drop from £300 to £220 with the newer engine.
Would the lack of business miles swing things either way?
Is car allowance taxed differently to additional salary?
Any help or advice gratefully received.
Moggy
I've been reading this thread (along with a few others!) and most people seem to say go for a car allowance rather than the car but I have a couple of questions as my situation is different, if anyone can help/guide me.
The job I am going for is probably going to pay £40k and I've been told that they will "more than likely offer a car". I know the company and they only ever buy A4's (& A6's for more senior managers) so it will be an A4 2.0tdi, maybe up to 3 years old as they have plenty around. They also provide a fuel card so I would have zero expenses other than the BIK/Tax
They do not offer car allowances so my question is, do I ask for £45k and not bother with the car? The extra 5k will likely net me £262 per month (using thesalarycalculator.co.uk) and looking online the car would probably cost me between £250-300 per month in tax.
Here are the figures I've been using so please tell me if I got it wrong!
With car;
Salary £40k = £2477.80 take home per month less BIK (say £300 for an older A4 to be safe!) = £2177.8 in my pocket and no car costs
Without car;
Salary £45k = £2740 take home per month, so £562 more which I would have available to buy and run a car.
As the extra salary would not be an "allowance" the company would have no say in how old a car I bought (I need to buy one as I don't currently live in the UK) although I wouldn't want to go older than say 4 years to try to keep reliability issues at bay.
I had a quick look on autotrader & found that to buy and run say a 08 Golf 1.4tsi (I know I could get something cheaper but quite fancied one :-p ) would be something like this;
Monthly payment £280 (£9000 over 3 years)
Road tax £12 (£135 pa)
Insurance £25 (£300 pa)
Fuel £180 (based on private miles of 12000 pa - say £40 per week) This is a large variable as I don't know where I'm going to live yet so the commute to work could be long or short depending on housing price/quality
That's almost £500 without servicing, repairs/breakdowns tyres etc. I currently put at least 1 pair of tyres on my car per year so that's another £15-20 per month.
That leaves approx £45 per month for the difference between a privately owned Golf and a company A4 with easy servicing, no worries about leaving "my baby" in a dodgy car park or at the airport etc. Also, that's only £10 per week and the fuel variable could swing that VERY quickly
I should also say that I will do little if any business miles as I will be office based (so no claim for using my own car).
It probably sounds like I've already talked myself into having the car but I really just want to check my figures & get some advice from people who have already done this. If my figures ARE right then I probably would go with the car, especially if they could provide a more efficient version to lower the tax (a friend informs me that it could drop from £300 to £220 with the newer engine.
Would the lack of business miles swing things either way?
Is car allowance taxed differently to additional salary?
Any help or advice gratefully received.
Moggy
moggymoggy said:
Stuff
Moggy
Some companies will only offer you a car as you may be customer facing. They want you to turn up in the car that doesn't give the wrong impression to the customers, and Audi A4s probably give the right kind of impression, not too flash, not a wreck. If you take you money you could fund a nice Porsche or something, but that might be too flashy for your customers. Like wise you could run wreck if you chose.Moggy
I took car allowance as my choice of lease through the company was a bit dull and i could either choose a Renault Grand Scenic or £475 in my pocket.
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