Who's opting out of their company car scheme? new tax rules

[Ecosseven]

Evening all,

I see the Government has increased the tax on diesel company cars. I currently take the allowance in lieu of a company car. Looking at the figures again today I'm glad I do! For a higher rate tax payer driving a 320d sport company car the monthly cost is already high and going to get higher. For example if you get the option of a £6,000 car allowance and opt to take the company car the monthly cost is as follows (hopefully my maths if correct)

2018 / 2019 - £329 (tax) + £290 ('lost' allowance after tax and N.I.) = £619
2019 / 2020 - £362 (tax) + £290 ('lost' allowance after tax and N.I. = £652
2020 / 2021 - £373 (tax) + £290 ('lost' allowance after tax and N.I) = £663.

In my scheme you have to keep the company car for 4 years so the minimum a 320d sport would cost me over 4 years would be over £31k assuming that the 2021 / 2022 tax figures are at least the same as the 2020 / 2021 figures.

Has anyone looked at the latest figures and decided to opt out?

[anonymous-user]

I have just started a new job with a car allowance and opting out was a no brainer. The options are all diesel, a 1 Series, A3, VW Golf or Ford Focus. Taking into account the BIK tax and loss of allowance, it would cost me around £16k to drive one of those cars for 3 years.

Loads of people have taken the company car option, I can only assume the excitement of getting a nice shiny new car has stopped them from doing some simple maths.

[Sheepshanks]

Joey Deacon said:

Loads of people have taken the company car option, I can only assume the excitement of getting a nice shiny new car has stopped them from doing some simple maths.

I opted out about 10 years ago but when we went through the exercise at work it was amazing how it varied for different users.

Mileage, and the split between business and private, is obviously a big factor. Some of our guys were doing 25K business miles and then another 15K private, so their maintenance and wear and tear costs where high.

Some of the younger staff couldn't get finance and were getting stupid insurance quotes.

I reckoned even then there was a "peace-of-mind" benefit of £100/mth in having a company car. Need to leave it in a lay-by all day - who cares? Shred a tyres - call Kwik-Fit mobile, no plea on PH for cheap tyre supplier. Etc...

[MC Bodge]

Joey Deacon said:

Loads of people have taken the company car option, I can only assume the excitement of getting a nice shiny new car has stopped them from doing some simple maths.

It is often a relatively cheap way of getting a new car and if you do a lot of business miles can make sense.

If you don't do a lot of business miles and don't mind not having a brand new car, then it's often not good value...

[MC Bodge]

Sheepshanks said:

I reckoned even then there was a "peace-of-mind" benefit of £100/mth in having a company car. Need to leave it in a lay-by all day - who cares? Shred a tyres - call Kwik-Fit mobile, no plea on PH for cheap tyre supplier. Etc...

For many people, yes.

If you don't mind an older car, have tools and know how to use them, have the Internet or a telephone and know how to use them you can service (few repairs needed these days) the car yourself and buy tyres.

You can drive it without having to answer to anybody even leave it and not worry.

[anonymous-user]

MC Bodge said:

Sheepshanks said:

I reckoned even then there was a "peace-of-mind" benefit of £100/mth in having a company car. Need to leave it in a lay-by all day - who cares? Shred a tyres - call Kwik-Fit mobile, no plea on PH for cheap tyre supplier. Etc...

For many people, yes.

If you don't mind an older car, have tools and know how to use them, have the Internet or a telephone and know how to use them you can service (few repairs needed these days) the car yourself and buy tyres.

You can drive it without having to answer to anybody even leave it and not worry.

Exactly what I do, my personal car doesn't actually meet the personal car rules in the company handbook but nobody ever checks. One of the guys tried to justify getting a company car to me by saying that if he needed a tyre he just got one fitted.

I worked out I could personally lease a brand new Seat Leon Cupra 300 and still be £180 a month better off than going for the company car option.

MC Bodge said:

Joey Deacon said:

Loads of people have taken the company car option, I can only assume the excitement of getting a nice shiny new car has stopped them from doing some simple maths.

It is often a relatively cheap way of getting a new car and if you do a lot of business miles can make sense.

If you don't do a lot of business miles and don't mind not having a brand new car, then it's often not good value...

We work from home the majority of the time and even when we visit customer site it is possible we might fly or take the train.

One of the guys I work with told me that his company car had done 1800 miles in 6 months (Total miles, not just business miles). Taking into account the BIK tax and the car allowance payment if he had taken that instead, I calculate that car has cost him £1.50 per mile he has driven it.

[Sheepshanks]

MC Bodge said:

For many people, yes.

If you don't mind an older car, have tools and know how to use them, have the Internet or a telephone and know how to use them you can service (few repairs needed these days) the car yourself and buy tyres.

That's what I do, but I could use my wife's car if I got stuck and it wouldn't be the end of the world if I couldn't make a meeting - they get chopped and changed all the time anyway.

When I worked for a big corporate they were strict on the age (max 6yrs) and type of car. People were also forever getting into trouble as we were supposed to have like-for-like courtesy car cover available but very few did so they were forced to hire cars if their own had an at-fault accident - a remarkably frequent occurrence amongst drivers recently opted out.

MC Bodge said:

You can drive it without having to answer to anybody even leave it and not worry.

I do hate leaving my car in certain places where I don't get a choice because someone else has made the arrangements - town centre multi-story's overnight, for example, I particularly dislike.

[MC Bodge]

Sheepshanks said:

When I worked for a big corporate they were strict on the age (max 6yrs) and type of car. People were also forever getting into trouble as we were supposed to have like-for-like courtesy car cover available but very few did so they were forced to hire cars if their own had an at-fault accident - a remarkably frequent occurrence amongst drivers recently opted out.

Was there a special dept to enforce car age / prestige compliance?

Presumably there was a requirement to have a UK-standard A4 or 3 Series?

[Sheepshanks]

MC Bodge said:

Was there a special dept to enforce car age / prestige compliance?

Presumably there was a requirement to have a UK-standard A4 or 3 Series?

Operations did it. Had to show V5, licence, and insurance details every year, or on change of vehicle.

There wasn't a prestige issue - cars just had to be 4/5 door saloons/estates and vaguely 'fit for purpose'. People who had had 5 Series company cars opted out and bought things like Vauxhall Astras (which caused a lot of wailing from senior management). A Ford Ka bodyshop courtesy car wasn't going to cut it though.

[agent006]

MC Bodge said:

Was there a special dept to enforce car age / prestige compliance?

Presumably there was a requirement to have a UK-standard A4 or 3 Series?

A company I worked for years ago had a "of suitability prestige brand" clause in the car allowance deal, which was a bit rich as one of the three(!) choices for a company car was a mid range Avensis saloon.

[MC Bodge]

Sheepshanks said:

People who had had 5 Series company cars opted out and bought things like Vauxhall Astras (which caused a lot of wailing from senior management). A Ford Ka bodyshop courtesy car wasn't going to cut it though.

Do people really still care about things like that?

[Teebs]

We don't have an option, although covering 30k PA I doubt i'd be better off taking an allowance.

It certainly works if you do little annual mileage.

[deanoz]

I have opted out due to this in the last couple of weeks, until you sit down and work out the actual cost of a company car its easy to ignore as the true cost doesn't show as a line item on your pay slip.

I've taken the car allowance and ordered a new car on a personal lease and even though I do 20K miles a year and building in maintenance and running costs I'm still significantly better off.

The company car will soon be killed off....

[Wooda80]

Teebs said:

We don't have an option, although covering 30k PA I doubt i'd be better off taking an allowance.

It certainly works if you do little annual mileage.

Depends how much of your 30k pa is business miles and how much is personal.

Assuming that your company pays you a pence per mile amount for business mileage then you have an extra tax free revenue from your mileage expenses. The more business miles you do, the greater the revenue and the more financially attractive it is to opt out.

https://www.gov.uk/guidance/rates-and-thresholds-f...

If you are doing 20000 business miles per annum then you can receive up to £7000pa tax free as Mileage Allowance Payments. The exact amount is at your employer's discretion but this is in addition to any salary in lieu of company car payment.

[TTmonkey]

Since getting a car allowance, my business mileage rate has dropped from 45ppm to 12ppm.

Is there anything I can do to reclaim the difference in some way? Seems a bit of a hit.

[Sheepshanks]

MC Bodge said:

Sheepshanks said:

People who had had 5 Series company cars opted out and bought things like Vauxhall Astras (which caused a lot of wailing from senior management). A Ford Ka bodyshop courtesy car wasn't going to cut it though.

Do people really still care about things like that?

If you mean the Ka, to be fair the main thing they were bothered about was its suitability for long distance driving.

[talksthetorque]

TTmonkey said:

Since getting a car allowance, my business mileage rate has dropped from 45ppm to 12ppm.

Is there anything I can do to reclaim the difference in some way? Seems a bit of a hit.

You can claim tax back on the difference between what you get paid and 45p a mile. ( for the first 10k business miles pa) then the difference between wht you get paid and 25p per mile for the rest of the mileage pa. You have to fill in a self assessment but it's easy peasy.


As for the original question, My car costs less to lease than the company car tax would be.

I get a car allowance, so in real terms - for my car - that is free money.

[A900ss]

I'm opting out as the BIK is getting crazy.

I do 30k a year, mostly business miles and allowance rules say my own car must be less than 5 years old.

Makes total sense for me as I'm getting paid mileage for every business miles I do so I'm considerably better off.

I can also get a practical family car for the kids and dog (estate/auto) Vs the manual saloon I get from the company.

[PeteinSQ]

I've just been promoted into a role where I get a car or allowance. I've still got a year left to run on a lease so will be opting out initially and given the tax implications I can't really see me opting back in.

I do hardly any business miles and only really do about 10k miles p.a of commuting and personal mileage so opting out seems like the best bet for me.

I'll need to check to see if they have rules on what car you're allowed to opt out for though.

[aberdeeneuan]

The only way it's making sense is if you can get into a hybrid, and even then it's debatable for the next two years.

My 330e is up this year in September, I'm going to opt out as there is no suitable hybrid available until next year at the earliest. So I'm buying privately until then and see what it all levels out.