Company Car Allowance
Discussion
I've used the search function but I'm still a little confused...
I have been offered a role which comes with £4000 car allowance. The car will only be used for commuting to work, so no business mileage I'm assuming.
I have played around with some on-line BIK calculators which show that the monthly BIK cost based on 40% tax is around £200 for the sort of car I'm looking at. My question relates to the £4000 annual allowance - does this £4000 get taxed as per my base salary, in which case I effectively would have £4000-Tax (which is probably 2 and a bit grand) to cover the BIK amount?
I have been offered a role which comes with £4000 car allowance. The car will only be used for commuting to work, so no business mileage I'm assuming.
I have played around with some on-line BIK calculators which show that the monthly BIK cost based on 40% tax is around £200 for the sort of car I'm looking at. My question relates to the £4000 annual allowance - does this £4000 get taxed as per my base salary, in which case I effectively would have £4000-Tax (which is probably 2 and a bit grand) to cover the BIK amount?
yep
hence usually you need to be doing a fair few miles to make the income tax and BIK actually worth more than just buying a cheap car yourself
company cars stopped being a real "perk" years ago and are taxed so much that only real business users doing 20K+ miles a year can make them pay
see if you can take the cash alternative and just look at it as £4K on top of your salary ...that dosent go up with pay rises usually ...
hence usually you need to be doing a fair few miles to make the income tax and BIK actually worth more than just buying a cheap car yourself
company cars stopped being a real "perk" years ago and are taxed so much that only real business users doing 20K+ miles a year can make them pay
see if you can take the cash alternative and just look at it as £4K on top of your salary ...that dosent go up with pay rises usually ...
bogie said:
company cars stopped being a real "perk" years ago and are taxed so much that only real business users doing 20K+ miles a year can make them pay
Not so. Company cars are still a cheap alternative to running your own car. On nearly all cars, even without business mileage.Take a £100K top of the range car with high CO2. BIK for a 40% taxpayer is 40% of 35% of £100K, so £14K a year. So that's just over £1K a month and that's for everything bar fuel. So servicing, insurance, and depreciation are all covered within that figure. That's cheap.
Buy something sensible, like a £20K Golf Bluemotion and BIK is about £130/month for a 40% taxpayer. It's still fantastic value. For 20% taxpayers it's a great deal.
swerni said:
Just treat your car allowance as part of your salary as it will be taxed accordingly.
Why would you do no private mileage in it?
It will be used for commuting to work AND private use. I won't be doing any business miles in it. I though fuel allowance was only for business use, eg travelling clients sites etc?Why would you do no private mileage in it?
TwigtheWonderkid said:
Not so. Company cars are still a cheap alternative to running your own car. On nearly all cars, even without business mileage.
Take a £100K top of the range car with high CO2. BIK for a 40% taxpayer is 40% of 35% of £100K, so £14K a year. So that's just over £1K a month and that's for everything bar fuel. So servicing, insurance, and depreciation are all covered within that figure. That's cheap.
Buy something sensible, like a £20K Golf Bluemotion and BIK is about £130/month for a 40% taxpayer. It's still fantastic value. For 20% taxpayers it's a great deal.
you are missing the loss of allowance surely?Take a £100K top of the range car with high CO2. BIK for a 40% taxpayer is 40% of 35% of £100K, so £14K a year. So that's just over £1K a month and that's for everything bar fuel. So servicing, insurance, and depreciation are all covered within that figure. That's cheap.
Buy something sensible, like a £20K Golf Bluemotion and BIK is about £130/month for a 40% taxpayer. It's still fantastic value. For 20% taxpayers it's a great deal.
so you pay the BIK, AND lose the allowance ....for me thats a £8K allowance...makes a big difference
so a Golf ends up costing £130 + 650 a month ...not worth it IMO if you only do a few K miles a year
bogie said:
TwigtheWonderkid said:
Not so. Company cars are still a cheap alternative to running your own car. On nearly all cars, even without business mileage.
Take a £100K top of the range car with high CO2. BIK for a 40% taxpayer is 40% of 35% of £100K, so £14K a year. So that's just over £1K a month and that's for everything bar fuel. So servicing, insurance, and depreciation are all covered within that figure. That's cheap.
Buy something sensible, like a £20K Golf Bluemotion and BIK is about £130/month for a 40% taxpayer. It's still fantastic value. For 20% taxpayers it's a great deal.
you are missing the loss of allowance surely?Take a £100K top of the range car with high CO2. BIK for a 40% taxpayer is 40% of 35% of £100K, so £14K a year. So that's just over £1K a month and that's for everything bar fuel. So servicing, insurance, and depreciation are all covered within that figure. That's cheap.
Buy something sensible, like a £20K Golf Bluemotion and BIK is about £130/month for a 40% taxpayer. It's still fantastic value. For 20% taxpayers it's a great deal.
so you pay the BIK, AND lose the allowance ....for me thats a £8K allowance...makes a big difference
so a Golf ends up costing £130 + 650 a month ...not worth it IMO if you only do a few K miles a year
then theres the BIK on the fuel card if you take the company car...but if you take the allowance you get tax relief on business miles at 45p a mile instead and pay BIK on the value of the fuel (so more money in your pocket at year end from tax man to help run your own car)
each has pros n cons, and everyones circumstances are different, but its not as clear cut as it used to be....before all this CO2 tax thing came in I remember some companies giving people 2 or 3 cars as part of their package, so you could get the whole family a new car every 3 years with an "exec job" supplied the company ...a nice way to take a pay rise for some
each has pros n cons, and everyones circumstances are different, but its not as clear cut as it used to be....before all this CO2 tax thing came in I remember some companies giving people 2 or 3 cars as part of their package, so you could get the whole family a new car every 3 years with an "exec job" supplied the company ...a nice way to take a pay rise for some
The way I used to view the company / personal car scenario.
I used to get £375 a month (after tax) for my allowance. A company car would probably have cost me £200 ish a month so I viewed that the amount I could spend was about £575 all in (insurance, fuel, running costs) before I was properly out of pocket.
I bought new for that (PCP) meaning running costs were minimal being an annual service and a few sets of tires.
I used to get £375 a month (after tax) for my allowance. A company car would probably have cost me £200 ish a month so I viewed that the amount I could spend was about £575 all in (insurance, fuel, running costs) before I was properly out of pocket.
I bought new for that (PCP) meaning running costs were minimal being an annual service and a few sets of tires.
Don't forget the IR also let you have tax relief on the difference between whatever your company gives you per mile and the 45/25ppm.
To me, the loss of allowance, the saving on the bik and the above add up to over £5k net per year.
The cheapest option is to either take a band 1 car and the trade down allowance or a 320d ed and even the BMW would cost me over £4.5k per year.
So unless my mileage was over 15k in which case they force you to take a car I'll stick with the allowance
To me, the loss of allowance, the saving on the bik and the above add up to over £5k net per year.
The cheapest option is to either take a band 1 car and the trade down allowance or a 320d ed and even the BMW would cost me over £4.5k per year.
So unless my mileage was over 15k in which case they force you to take a car I'll stick with the allowance
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