Company car v car allowance, help required!

[Alfa Pete]

I have a job offer and need to make a decision on whether to accept and my decision will be partly influenced by understanding on whether I am better with the current employer's company car or with the potential new employer's allowance.

I am a 40% tax payer, with a BMW 320d Efficient dynamics Business edition,which cost £30,400 with C02 of 109 , and sits in the 17% bracket.

If my sums are correct this costs me £170 a month in BIK tax a month.I pay for my own fuel and claim back business mileage fuel at 14p a mile.

I will cover 28k miles this year of which half are business.

The new job is offering a car allowance of £4,300 per year initially, though I am told this is likely to go up to £5200 per year when it is reviewed.Business miles will be reimbursed at 40 p per mile.

I think my mileage will be slightly less in the new job as I will be covering a smaller area probably no more than 25k miles a year of which somewhere between 6 and 10k will be business.

The car allowance rules say cars need to be no more than 4 years old and less than 100k miles,and not less than a 1.6.

Anyone else been in this position and how did it work for you?

[Rick Cutler]

Go with the Company Car option,

I was in the same place only a few months ago and ended up going down the personal lease thing. I now have a Jaguar XF Sportbrake only to be told last week that the company is laying me off!

If it were a company car i would have just given it back. 14p per mile equates to around 45mpg so if you drive the car for personal use this just about covers fuel. Yes the company car tax is one thing but you don't have to worry about anything on the car.

Company Car if the option is there, plus business rates on car leasing are soooo much better then personal lease.

[andy-xr]

The £4,3k and £5,2k are gross? So you'll net about £200/month? You'll end up in a Fiesta

I'd take a company car any day of the week to be honest, but that's because I've been stung before where I've been mid term in a PCP and was let go. I needed that car allowance to be able to pay the PCP, so when it wasnt available and it took me a while to find work again I had to have some awkward conversations

[simo1863]

if you take an allowance will they also tell you how to spend it?

Do you enjoy driving or are you happy in a 320D or similar repmobile?

If you're comparing like for like then I'd suggest sticking with a company car (you won't need to consider maintenance or insurance either) but if you want a 10 year old MX-5 as a DD then it's going to be cheaper to take the allowance.

Also, someone will come along in a minute and tell you to look into claiming Mileage Allowance Relief (difference between your 14 pence per mile and the government allowed 45 pence per mile). Look it up.

Edit; just seen the stipulation so maybe better sticking with the company car.

[Rick Cutler]

Oh and surely the company so ask you to reimburse the personal mileage on a company car and pay for all the fuel. The majority of driving will be business will it not.

[jamiebae]

No brainer, take the car. Post tax you'll struggle to own, tax, insure and maintain a three year old Focus for £350 a month if you're knocking on the door of 30k miles a year.

As the allowance is post tax you lose almost half of it, and adding in the tax saving on the company car you're going to finish up with under £400 a month in your pocket to cover the running costs of the car.

[Searider]

Need to add in the 40p per mile he will get paid for business miles on top of the at allowance.
8k miles at 40p is another £3200 pa tax free.

[moffat]

Pretty sure business mileage is taxable in your payslip.

[Alfa Pete]

My sums so far!

Current company car costs £170 a month BIK tax which I would no longer pay so I have £170 and my £210 net a month allowance.On top of this I have 40p a mile for the first 10k miles. If I take fuel out of the equation (say 15p a mile) that`s 25p a mile to add to the pot.So if I did 10k business miles I'd get an extra £208 per month net and untaxed.

This gives me a budget of £588 per month to cover a loan/pcp/finance,insurance,servicing,tyres and breakdown cover.Anything I have missed?

Is my thinking correct?

Car choice is limited to Hatch/estate/ saloon, less than 4 years old,less than 100k miles and I have 3 kids so it's going to be a repmobile sort of machine and I do a fair few private miles so it will be diesel too.

Would this work with a PCP on a new or nearly new German repmobile or could it work on something like a 2 year old Mondeo bought for circa £12k on a loan?

[Alfa Pete]

moffat said:

Pretty sure business mileage is taxable in your payslip.

The cash equivalent salary and incurs tax.The business miles aren't .You claim back 40ppm on your expenses and it is untaxed.You can even claim back the difference of 5p per mile back from the HMRC at the end of the tax year.

[xRIEx]

Alfa Pete said:

The cash equivalent salary and incurs tax.The business miles aren't .You claim back 40ppm on your expenses and it is untaxed.You can even claim back the difference of 5p per mile back from the HMRC at the end of the tax year.

You can claim the tax on the difference back, so you can claim 40% of 5p/mile.

The car allowance, as it's basically cash, is also subject to NI deductions.

After 10k miles, the tax-free amount per mile drops to 25p, so if you're doing 14k per year, you'll get 42p/mile (including the reclaim) for the first 10k, then (assuming the company still pays you 40p/mile over 10k miles) 34p/mile for the 4k (after 40% tax on the 15p over the tax free amount).

So mileage reimbursement per year is either £5560 (if you always get 40p/mile) or £5200 (if reimbursement drops to 25p after 10k).

[sinbaddio]

Just had the same dilemma. 320d Business as a company car or £6k a year allowance. Now I've had car allowances since 2001 and company cars before that (Mondeo/Focus etc). So in 2001 when the opportunity arose I jumped at it, buying an Alfa 166 V6 (not the most logical purchase but I was very excited). After a few years of exciting cars I ended up in Merc C's and BMW 3's as they general have the lowest TCO, highest resale value after 3 years. But they have always cost me way more than the allowance + mileage + HMRC mileage allowance + the tax you would have paid on a co car.

And, the knowledge that you don't have to tax it/insure it/maintain it - makes it a no brainer for me. Hope this helps.

[andy-xr]

Sounds like you're too exposed if you go the allowance route with a like for like car, but your call

[deanogtv]

I came across to a new position for other reasons, here I get a decent allowance but it wouldn't get me the new A3 I was running at my other company.
As other have said, after tax my £5k allowance is halved

Edited by deanogtv on Thursday 14th August 13:10