Can someone please explain Company Car / Allowance?
Discussion
I'll preface this by stating that i know i should know this as it IS well documented and i will of course be asking. I just need someone to explain this to me like i'm five.
I'm starting a new job soon which i'm very grateful for after being made redundant last year and getting a bit twitchy. That aside, here are the salient points...
1. I get a company car / allowance as part of the package
2. i can choose to lease from their provider and i'm advised that the best way to do this is to go full EV or Plug In Hybrid
3. Cash Allowance is available. This is higher than the rental of course due to me being responsible for all upkeep whereas a company car is handled centrally and i'm handling just fuel, etc.
My situation:
I have a car currently on a (not great) PCP deal that isn't due to end for another 2 years. I'm over the milage on it by a considerable margin so giving it back might be expensive at 6p a mile and in all honesty i've no idea how that works. Can i terminate the agreement half way through the deal and cite company car as justification?
Reading the policy docs it looks like the allowance must be used for a car and i will have to evidence that, i'll ask on monday if i take the allowance can i use it to continue payments on the PCP deal i have and keep going that way? I don't think this is the best way to do this to maximise any tax benefit?
Go easy, thanks!
I'm starting a new job soon which i'm very grateful for after being made redundant last year and getting a bit twitchy. That aside, here are the salient points...
1. I get a company car / allowance as part of the package
2. i can choose to lease from their provider and i'm advised that the best way to do this is to go full EV or Plug In Hybrid
3. Cash Allowance is available. This is higher than the rental of course due to me being responsible for all upkeep whereas a company car is handled centrally and i'm handling just fuel, etc.
My situation:
I have a car currently on a (not great) PCP deal that isn't due to end for another 2 years. I'm over the milage on it by a considerable margin so giving it back might be expensive at 6p a mile and in all honesty i've no idea how that works. Can i terminate the agreement half way through the deal and cite company car as justification?
Reading the policy docs it looks like the allowance must be used for a car and i will have to evidence that, i'll ask on monday if i take the allowance can i use it to continue payments on the PCP deal i have and keep going that way? I don't think this is the best way to do this to maximise any tax benefit?
Go easy, thanks!
A company car, and especially a car allowance scheme, is a way for an employer to reward you more without having to pay more Employer's pension or , NI contributions or salary related bonus come to that.
In your circumstances as I see it you have two options
- take the cash and continue with the PCP until that deal ends, then take a car from the employer's provider (NB other deals are available...)
- take the new car and park the PCP up until the mileage overage erodes to a nil or affordable penalty.
You need to check whether the PCP car meets the requirements of the new scheme, most require the car is under 5 years old and may require business use insurance
In your circumstances as I see it you have two options
- take the cash and continue with the PCP until that deal ends, then take a car from the employer's provider (NB other deals are available...)
- take the new car and park the PCP up until the mileage overage erodes to a nil or affordable penalty.
You need to check whether the PCP car meets the requirements of the new scheme, most require the car is under 5 years old and may require business use insurance
Davie_GLA said:
Reading the policy docs it looks like the allowance must be used for a car and i will have to evidence that,
Might be worth checking how strictly they enforce that in practice. As another poster mentioned car allowance is sometimes used by Companies to pay staff extra without the NI/Pension implications, they don't really care if you have a car or not. My youngest works in London and gets everywhere by Tube or Uber. It would be bonkers for her to buy a car.Davie_GLA said:
i'll ask on monday if i take the allowance can i use it to continue payments on the PCP deal i have and keep going that way? I don't think this is the best way to do this to maximise any tax benefit?
You'll definitely be able to do that but you're right, it doesn't take advantage of ANY tax benefit. You'll be paying tax on the payment at your top rate whereas if you were leasing a car through the Company's lease scheme you would only be paying BIK which (on EV vehicles) which is currently 3% but is due to rise to 9% over the next 5 years.Thanks all, appreciate all of that.
The car i have is a 2021, good condition and meets all criteria. So when this all lands it will be right on the bubble so i'll check that with the company.
Good shout on parking the PCP car and let the milage catch up however it's grossly over (about 20k) - a result of my wifes car failing and using this to go everywhere and do everything. I've since bought another estate car with a tow bar for the general day to day / towing horses etc. The current PCP car isn't equipped for a tow bar but we digress.
I think i'll explore taking the cash allowance for year one is i can use it to pay the PCP, or at least the bulk of it. That will save me money but still zero tax benefits.
The car i have is a 2021, good condition and meets all criteria. So when this all lands it will be right on the bubble so i'll check that with the company.
Good shout on parking the PCP car and let the milage catch up however it's grossly over (about 20k) - a result of my wifes car failing and using this to go everywhere and do everything. I've since bought another estate car with a tow bar for the general day to day / towing horses etc. The current PCP car isn't equipped for a tow bar but we digress.
I think i'll explore taking the cash allowance for year one is i can use it to pay the PCP, or at least the bulk of it. That will save me money but still zero tax benefits.
therams said:
Is the lease from their provider a salary sacrifice lease scheme. E.g. similar to the ones run by Tusker or OctopusEV?
If it is, this sort of scheme, with an EV as the car is usually the cheapest way to do things - i.e. best for you (as long as you want a EV)
No, the allowance is in addition to my salary and i believe they take them on contract hire from various suppliers.If it is, this sort of scheme, with an EV as the car is usually the cheapest way to do things - i.e. best for you (as long as you want a EV)
When I was still employed my employer decided to do away with company cars and instead give us a car allowance paid simply as salary so subject to usual deductions but not pensionable.
What we did with this was up to us.
The one advantage but also disadvantage of a separate appearing payment each month was that come annual pay rise time car allowances were never looked at but consequently never increased.
What we did with this was up to us.
The one advantage but also disadvantage of a separate appearing payment each month was that come annual pay rise time car allowances were never looked at but consequently never increased.
On the question of the existing car on PCP, everyone is missing the point that (excess) mileage is not relevant unless you plan to hand the car back to the finance company at the end of the term.
You also have the option of ending the PCP at any time by selling or part-exchanging the car if you want to. Obviously, the value of the car will be determined by the prevailing mileage, but this will be of no relevance to the finance company.
You also have the option of ending the PCP at any time by selling or part-exchanging the car if you want to. Obviously, the value of the car will be determined by the prevailing mileage, but this will be of no relevance to the finance company.
Davie_GLA said:
I'll preface this by stating that i know i should know this as it IS well documented and i will of course be asking. I just need someone to explain this to me like i'm five.
I'm starting a new job soon which i'm very grateful for after being made redundant last year and getting a bit twitchy. That aside, here are the salient points...
1. I get a company car / allowance as part of the package
2. i can choose to lease from their provider and i'm advised that the best way to do this is to go full EV or Plug In Hybrid
3. Cash Allowance is available. This is higher than the rental of course due to me being responsible for all upkeep whereas a company car is handled centrally and i'm handling just fuel, etc.
My situation:
I have a car currently on a (not great) PCP deal that isn't due to end for another 2 years. I'm over the milage on it by a considerable margin so giving it back might be expensive at 6p a mile and in all honesty i've no idea how that works. Can i terminate the agreement half way through the deal and cite company car as justification?
Reading the policy docs it looks like the allowance must be used for a car and i will have to evidence that, i'll ask on monday if i take the allowance can i use it to continue payments on the PCP deal i have and keep going that way? I don't think this is the best way to do this to maximise any tax benefit?
Go easy, thanks!
You have a car on PCP, no further evidence is required. They may set parameters for maximum age and type of car, e.g. no 2 seaters, but they cannot dictate what car you choose if you take the allowance.I'm starting a new job soon which i'm very grateful for after being made redundant last year and getting a bit twitchy. That aside, here are the salient points...
1. I get a company car / allowance as part of the package
2. i can choose to lease from their provider and i'm advised that the best way to do this is to go full EV or Plug In Hybrid
3. Cash Allowance is available. This is higher than the rental of course due to me being responsible for all upkeep whereas a company car is handled centrally and i'm handling just fuel, etc.
My situation:
I have a car currently on a (not great) PCP deal that isn't due to end for another 2 years. I'm over the milage on it by a considerable margin so giving it back might be expensive at 6p a mile and in all honesty i've no idea how that works. Can i terminate the agreement half way through the deal and cite company car as justification?
Reading the policy docs it looks like the allowance must be used for a car and i will have to evidence that, i'll ask on monday if i take the allowance can i use it to continue payments on the PCP deal i have and keep going that way? I don't think this is the best way to do this to maximise any tax benefit?
Go easy, thanks!
From what you have posted I would suggest that keeping your PCP is the best way to go for now. Look at the situation again when it is finished.
Also, what ppm are they paying for business mileage? If it is your car then if it is any different to HMRC guidelines you can claim the difference on your annual tax return. HMRC currently 45p/mile for 1st 10k miles, 25p thereafter.
Yeah, just keep the PCP and review the options when this car goes back. Save some of the monthly allowance towards the excess mileage charge.
Claim the tax if you get less than 45p/25p (easy enough, just need the right documentation given it's HMRC...)
We have the option of company car (EV), Salary Sacrifice (EV or Hybrid) or cash allowance. There's not a 'right' answer as it depends on your situation, usage, budget etc.
Claim the tax if you get less than 45p/25p (easy enough, just need the right documentation given it's HMRC...)
We have the option of company car (EV), Salary Sacrifice (EV or Hybrid) or cash allowance. There's not a 'right' answer as it depends on your situation, usage, budget etc.
Your current car, what’s the outstanding amount? You need a settlement figure from the finance company
If you’re over 50% of the way though with the total amount you could voluntary terminate it
Alternatively you might be able to just sell the car and pay off the finance and take a company car
Personally I would always go company car especially EV, the savings are massive, and the problem with taking the cash is it’s taxed.
If you’re over 50% of the way though with the total amount you could voluntary terminate it
Alternatively you might be able to just sell the car and pay off the finance and take a company car
Personally I would always go company car especially EV, the savings are massive, and the problem with taking the cash is it’s taxed.
Quattr04. said:
Your current car, what s the outstanding amount? You need a settlement figure from the finance company
If you re over 50% of the way though with the total amount you could voluntary terminate it
Alternatively you might be able to just sell the car and pay off the finance and take a company car
Personally I would always go company car especially EV, the savings are massive, and the problem with taking the cash is it s taxed.
I'm on payment 31 of 49, so over half way. If you re over 50% of the way though with the total amount you could voluntary terminate it
Alternatively you might be able to just sell the car and pay off the finance and take a company car
Personally I would always go company car especially EV, the savings are massive, and the problem with taking the cash is it s taxed.
Settlement figure is £20,767
WBAC say the car is worth just north of £16k so i'd be looking at making the difference up and we know WBAC will not stick with that number. I'm going to run it through another group i've used that were a bit more of a pain to deal with (a billion photos) but they paid what they said they would. carbuyinggroup dot com, no affiliation.
Davie_GLA said:
I'm on payment 31 of 49, so over half way.
Settlement figure is £20,767
WBAC say the car is worth just north of £16k so i'd be looking at making the difference up and we know WBAC will not stick with that number. I'm going to run it through another group i've used that were a bit more of a pain to deal with (a billion photos) but they paid what they said they would. carbuyinggroup dot com, no affiliation.
Try motorway.Settlement figure is £20,767
WBAC say the car is worth just north of £16k so i'd be looking at making the difference up and we know WBAC will not stick with that number. I'm going to run it through another group i've used that were a bit more of a pain to deal with (a billion photos) but they paid what they said they would. carbuyinggroup dot com, no affiliation.
Take the cash and continue with your PCP for now until you're settled in the job. An early termination of a lease on an EV due to leaving a job within the lease term is financially horrific.
Example (back of fag packet); a year and 10k miles into a lease on a tesla model 3 and you resign they may come asking for as much as £14k in early termination charge. Basically the gap in depreciation.
Using my car allowance for an EV is without doubt the best/only financially sound decision I've ever made when it comes to cars, but I knew I would not be voluntarily leaving during the term.
Example (back of fag packet); a year and 10k miles into a lease on a tesla model 3 and you resign they may come asking for as much as £14k in early termination charge. Basically the gap in depreciation.
Using my car allowance for an EV is without doubt the best/only financially sound decision I've ever made when it comes to cars, but I knew I would not be voluntarily leaving during the term.
SuperTee said:
Take the cash and continue with your PCP for now until you're settled in the job. An early termination of a lease on an EV due to leaving a job within the lease term is financially horrific.
Example (back of fag packet); a year and 10k miles into a lease on a tesla model 3 and you resign they may come asking for as much as £14k in early termination charge. Basically the gap in depreciation.
Using my car allowance for an EV is without doubt the best/only financially sound decision I've ever made when it comes to cars, but I knew I would not be voluntarily leaving during the term.
Thanks, that's where i've landed, too. Example (back of fag packet); a year and 10k miles into a lease on a tesla model 3 and you resign they may come asking for as much as £14k in early termination charge. Basically the gap in depreciation.
Using my car allowance for an EV is without doubt the best/only financially sound decision I've ever made when it comes to cars, but I knew I would not be voluntarily leaving during the term.
Take the cash allowance to get started then you will be in a much better position to work it out. It can be quite complicated, and a lot depends on how many miles you're doing and who pays for what fuel when.
I was in this situation when I changed jobs not so long ago and the cash allowance worked out to be the best option based on relatively low mileage and the fact I can usually use the train anyway (fully paid for and very green!)
I was in this situation when I changed jobs not so long ago and the cash allowance worked out to be the best option based on relatively low mileage and the fact I can usually use the train anyway (fully paid for and very green!)
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