Discussion
When you get a free car to use for your job how does the tax work?
Lets say thier is 2 jobs. Both earn 30,000 but one you get a company car.
Would you end up with less disposable income at the end of the month if you had a company car compared to if you just owned your own car??
It confuses me.
Lets say thier is 2 jobs. Both earn 30,000 but one you get a company car.
Would you end up with less disposable income at the end of the month if you had a company car compared to if you just owned your own car??
It confuses me.
Yes, the company car user will have more tax taken out of their pay packet.
"Disposable income" is a different matter - the person without the company car will dispose of some of their money on the car costs; the company car user won't.
Like car for like car, the company car user is most likely to be better off (in terms of the usual sort of car provided, a diesel hatchback or repmobile with an MRP between £15k and £50k).
"Disposable income" is a different matter - the person without the company car will dispose of some of their money on the car costs; the company car user won't.
Like car for like car, the company car user is most likely to be better off (in terms of the usual sort of car provided, a diesel hatchback or repmobile with an MRP between £15k and £50k).
The way company car tax works is there is a value that is calculated by the co2 emissions that is added to your salary
Comcar shows you the rates.
The less co2 a car emits the less money you will pay in tax depending how much the car is worth.
What car is involved and is there a fuel allowance
Comcar shows you the rates.
The less co2 a car emits the less money you will pay in tax depending how much the car is worth.
What car is involved and is there a fuel allowance
Quick example:
My company car mazda 6 costs me £182 a month all in.
If I was to buy that personally, I'd be looking at £230-250/month lease, £400 a year for insurance, £300 tyres and probably £1-1.5k deposit to start with. Plus fuel (35000 miles a year).
One costs just over £2k a year, the other costs about £5k.
My company car mazda 6 costs me £182 a month all in.
If I was to buy that personally, I'd be looking at £230-250/month lease, £400 a year for insurance, £300 tyres and probably £1-1.5k deposit to start with. Plus fuel (35000 miles a year).
One costs just over £2k a year, the other costs about £5k.
MattHall91 said:
Quick example:
My company car mazda 6 costs me £182 a month all in.
If I was to buy that personally, I'd be looking at £230-250/month lease, £400 a year for insurance, £300 tyres and probably £1-1.5k deposit to start with. Plus fuel (35000 miles a year).
One costs just over £2k a year, the other costs about £5k.
182 in tax you mean?? So insurance and everything is included then? What happens if you use the car for personal miles??My company car mazda 6 costs me £182 a month all in.
If I was to buy that personally, I'd be looking at £230-250/month lease, £400 a year for insurance, £300 tyres and probably £1-1.5k deposit to start with. Plus fuel (35000 miles a year).
One costs just over £2k a year, the other costs about £5k.
GAjon said:
The confusion may be you say a free car and the tax man says income, which is taxable, so not both on £30k.
Very good point.dieseluser07 said:
As soon as you hit 35k do you really have to pay double the company car tax.
I.E 66 pound tax vs 132 pound tax for earning a couple of extra grand and therefore you would be better off earning 34000 rather than 35000?
Not necessarily. The Benefit In Kind (BIK) value is a percentage of the car's recommended new price, and increases with CO2 g/100km. You then pay tax on the that BIK percentage at your normal rate.I.E 66 pound tax vs 132 pound tax for earning a couple of extra grand and therefore you would be better off earning 34000 rather than 35000?
E.g. car is £20000, BIK is 15%, BIK amount is £3000.
That £3000 is "added on" to your salary (as GAjon pointed out above) and tax is paid on that.
So if you're paying 20% tax, you pay £600 per year extra in tax, so it knocks £50 per month off your take home pay.
The higher tax rate kicks in at £42k-ish, not £35k.
If your salary is £35k and the BIK of the company car is, say, £7.5k, then you would pay 20% on £7k of the company car benefit (because it takes you up to the £42k threshold), and 40% on £500 of the company car benefit, the benefit over £42k (if I'm right that the tax rate changes at £42k, it may not be exactly that).
dieseluser07 said:
MattHall91 said:
Quick example:
My company car mazda 6 costs me £182 a month all in.
If I was to buy that personally, I'd be looking at £230-250/month lease, £400 a year for insurance, £300 tyres and probably £1-1.5k deposit to start with. Plus fuel (35000 miles a year).
One costs just over £2k a year, the other costs about £5k.
182 in tax you mean?? So insurance and everything is included then? What happens if you use the car for personal miles??My company car mazda 6 costs me £182 a month all in.
If I was to buy that personally, I'd be looking at £230-250/month lease, £400 a year for insurance, £300 tyres and probably £1-1.5k deposit to start with. Plus fuel (35000 miles a year).
One costs just over £2k a year, the other costs about £5k.
If I'd have opted out of free personal fuel, it would be about £125 a month and then I'd put my own fuel in at weekends. So basically, as long as I use more than a full tank a month at weekends, it's worth me going for free fuel. The 60-ish quid is the tax on personal fuel.
dieseluser07 said:
MattHall91 said:
Quick example:
My company car mazda 6 costs me £182 a month all in.
If I was to buy that personally, I'd be looking at £230-250/month lease, £400 a year for insurance, £300 tyres and probably £1-1.5k deposit to start with. Plus fuel (35000 miles a year).
One costs just over £2k a year, the other costs about £5k.
182 in tax you mean?? So insurance and everything is included then? What happens if you use the car for personal miles??My company car mazda 6 costs me £182 a month all in.
If I was to buy that personally, I'd be looking at £230-250/month lease, £400 a year for insurance, £300 tyres and probably £1-1.5k deposit to start with. Plus fuel (35000 miles a year).
One costs just over £2k a year, the other costs about £5k.
Servicing, tyres, insurance, tax, usually all included. Insurance excess most likely not included.
Normally you just pay for the fuel you use during private use and enjoy a new car which you don't need to worry about when it comes to repairs, servicing, tyres, insurance, tax.
Want to leave it in a pub car park over night. No problem.
Hit a pot hole and blow a tyre. Off to the tyre centre, sign on the dotted line company pay the bill.
Car breaks down, loaner in your hands, the fleet manger deals with the headache.
Someone leave a dent in the door while you're in bed. Loaner and fleet manager deals with the bodywork.
Smash the thing up. Sheepishly leave the keys with the Fleet manager and take the loan car while he has the headache.
For the pain free life a company car gives you. I'd take one every time. (even if the maths didn't work out)
Want to leave it in a pub car park over night. No problem.
Hit a pot hole and blow a tyre. Off to the tyre centre, sign on the dotted line company pay the bill.
Car breaks down, loaner in your hands, the fleet manger deals with the headache.
Someone leave a dent in the door while you're in bed. Loaner and fleet manager deals with the bodywork.
Smash the thing up. Sheepishly leave the keys with the Fleet manager and take the loan car while he has the headache.
For the pain free life a company car gives you. I'd take one every time. (even if the maths didn't work out)
Some good points raised here. As a company car driver looking to get the f
k out of sales and ditch my company car ASAP, these are the pros and cons as I see it:
Pros
- worry free motoring (servicing, crashes, tyres etc are no problem)
- personal use of fuel if you opt in
- new-ish car every few years
Cons
- you have to pay BIK tax whether you want to use the car outside of work or not. So if you want a 2nd car, you still have to pay for the work car that you might never use for personal use
- choice of car at low/exec level is abysmal in general
- nearly all companies only offer diesel
- you can't build up any no claims while using a company car
- neighbours/fellow road users will think you are a boring sod in a rep mobile
I wouldn't ever have one again.
k out of sales and ditch my company car ASAP, these are the pros and cons as I see it:Pros
- worry free motoring (servicing, crashes, tyres etc are no problem)
- personal use of fuel if you opt in
- new-ish car every few years
Cons
- you have to pay BIK tax whether you want to use the car outside of work or not. So if you want a 2nd car, you still have to pay for the work car that you might never use for personal use
- choice of car at low/exec level is abysmal in general
- nearly all companies only offer diesel
- you can't build up any no claims while using a company car
- neighbours/fellow road users will think you are a boring sod in a rep mobile
I wouldn't ever have one again.
stumpage said:
Normally you just pay for the fuel you use during private use and enjoy a new car which you don't need to worry about when it comes to repairs, servicing, tyres, insurance, tax.
Want to leave it in a pub car park over night. No problem.
Hit a pot hole and blow a tyre. Off to the tyre centre, sign on the dotted line company pay the bill.
Car breaks down, loaner in your hands, the fleet manger deals with the headache.
Someone leave a dent in the door while you're in bed. Loaner and fleet manager deals with the bodywork.
Smash the thing up. Sheepishly leave the keys with the Fleet manager and take the loan car while he has the headache.
For the pain free life a company car gives you. I'd take one every time. (even if the maths didn't work out)
This. If you have a sensible list and select carefully (CO2 is everything) you should be financially better off, but it is the hassle free driving that really makes the deal. I would also stick with the company car even if it looked slightly more expensive. As someone else pointed out, usually not worth taking the free fuel (if offered) as this is caned in tax.Want to leave it in a pub car park over night. No problem.
Hit a pot hole and blow a tyre. Off to the tyre centre, sign on the dotted line company pay the bill.
Car breaks down, loaner in your hands, the fleet manger deals with the headache.
Someone leave a dent in the door while you're in bed. Loaner and fleet manager deals with the bodywork.
Smash the thing up. Sheepishly leave the keys with the Fleet manager and take the loan car while he has the headache.
For the pain free life a company car gives you. I'd take one every time. (even if the maths didn't work out)
dieseluser07 said:
182 in tax you mean?? So insurance and everything is included then? What happens if you use the car for personal miles??
When you get a company car everything is usually included, fuel, maintenance/consumables, RFL, insurance & fuel it is at my place of work, you just have to pay back any fuel you use (we have fuel cards) for personal use, ie going to the shops, on holiday or commuting, you need to keep track of personal mileage.The tax man sees having a company car as a benefit (it is because you don't have to run a car yourself for personal use), so you have to pay tax on it, that tax is rather high and is calculated using the cars list price and the emissions.
My advice would be to go for the cheapest but safest car for your job role, if the company car is a business tool and you do significant motorway miles, then unfortunately you will be penalised for that because you will likely need a bigger car with a big more grunt in order get about, if the car is a benefit and you are office based then personally I have a look at the smaller more economical cars but if your like me and nothing takes your fancy then opting out might be an option for you (its very dependant on how much the pay per mile etc) if your new place of work allows it.
Unfortunately if you do a lot of miles for a business the best option would likely be to take a company car due to the maintenance costs being covered, but it does depend on the miles you will be doing. At my work people do a lot of miles, cars are usually handed back after 3 years with a good 150-200k on them.
dieseluser07 said:
Asif you dont earn any no claims, ive currently got 7 years i would keep them wouldent i??
Most insurers will accept a letter from your employer saying "blah blah, sole use of company car for blah years, no accidents in that time, blah" in place of NCD. However, if you had a company car for three years, your 7 years NCD would probably expire and you'd only get 3 confirmed years from your company. When the question has come up in the past, I'm fairly sure insurers haven't accepted that as proof of 10 years, unfortunately.stumpage said:
Normally you just pay for the fuel you use during private use and enjoy a new car which you don't need to worry about when it comes to repairs, servicing, tyres, insurance, tax.
Want to leave it in a pub car park over night. No problem.
Hit a pot hole and blow a tyre. Off to the tyre centre, sign on the dotted line company pay the bill.
Car breaks down, loaner in your hands, the fleet manger deals with the headache.
Someone leave a dent in the door while you're in bed. Loaner and fleet manager deals with the bodywork.
Smash the thing up. Sheepishly leave the keys with the Fleet manager and take the loan car while he has the headache.
For the pain free life a company car gives you. I'd take one every time. (even if the maths didn't work out)
It's not 100% pain free.Want to leave it in a pub car park over night. No problem.
Hit a pot hole and blow a tyre. Off to the tyre centre, sign on the dotted line company pay the bill.
Car breaks down, loaner in your hands, the fleet manger deals with the headache.
Someone leave a dent in the door while you're in bed. Loaner and fleet manager deals with the bodywork.
Smash the thing up. Sheepishly leave the keys with the Fleet manager and take the loan car while he has the headache.
For the pain free life a company car gives you. I'd take one every time. (even if the maths didn't work out)
The taxation can be a pain in the arse as can adding extras which are sometimes needed with some brands.
If you have a fault accident in your company car in a lot of cases the accident will be recorded in your name and uploaded to CUE. Also, my last company car scheme also had a rule about number of fault accidents and claims. So it can be similar to having your own car. Breaking down is different and the hire cars a car scheme can offer are useful. Agreed on punctures too.
Service packs on many new cars also means that your don't need to worry about that either.
I generally believe that if you do under 15k per annum then opt out and get your own car over 15k per annum get a company car.
moffat said:
It's not 100% pain free.
The taxation can be a pain in the arse as can adding extras which are sometimes needed with some brands.
So if you buy the purchase price and costs of any extras which are sometimes needed are a thing of joy?.....oh and the subsequent depreciation. The taxation can be a pain in the arse as can adding extras which are sometimes needed with some brands.
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