Company car question

[TB Rich]

(Re posting in this section as not a single reply elsewhere!)

Hi folk, I have a question about company cars.

I have now been offered one, limited choice im afraid and nothing PH worthy so I want something uber cheap on the wallet really (Ford Focus 5dr 1.6 TDCi should fit the bill) and hopefully save for an Exige sometime next year- Krypton green of course

Basically, I'm just trying to pre-empt what this will do to my monthly income. As my salary for now is not going up along with the car.

Now as I understand it there is a benifit in kind value (about £2300 for the Ford), and then either basic rate or higher rate tax is paid on this value. Correct so far?? Now my question, to decide the taxable rate, is the benifit in kind value added on to your salary to decide? This would I think put me into the higher rate bracket. So would I only pay 40% on the part of the car that goes into the 40% range and 22% on the rest.
Also, someone said to me about personal allowances and this will cover the car? How does this fit in to the equation?

Many thanks if you can take the time to explain this all to me, I'm more than a little clueless as you can probably tell!!

Regards,
Rich.

[smartie]

Yiu will already be using your full personal allowance (I would imagine) in your salary so ignore that. Other than that, your thoughts are correct. Also be aware that there may be an additional amount due if they pay for your personal fuel.

[TB Rich]

I think I've worked it out now, is this right?

My tax code is 552L, so thats £5229 personal allowance. Subtract the benifit in kind value (£2453) from my PA = £2776.

This will create me a new tax code of 277L ?

Working out my montly tax using www.ir35calc.co.uk and the 2 differing tax codes, I now know my monthly cost of having the car? Am I working this out correctly?

2nd issue is fuel, its a fuel card so everything goes on that. Personal mileage is not granted so I presume in effect I pay it back through tax. I don't do many personal miles right now, about £40 fuel on average so would it be safe to estimate a similar cost but only in tax?

Thanks.

[Deva Link]

TB Rich said:

Basically, I'm just trying to pre-empt what this will do to my monthly income. As my salary for now is not going up along with the car.

Having a company car should save you money, otherwise it's a bit pointless!

TB Rich said:

Now as I understand it there is a benifit in kind value (about £2300 for the Ford), and then either basic rate or higher rate tax is paid on this value.
Correct so far??

Correct.

TB Rich said:

Now my question, to decide the taxable rate, is the benifit in kind value added on to your salary to decide?
This would I think put me into the higher rate bracket. So would I only pay 40% on the part of the car that goes into the 40% range and 22% on the rest.

All corect.

TB Rich said:

Also, someone said to me about personal allowances and this will cover the car? How does this fit in to the equation?

I can only assume they mean (in a very warped way of looking at things) that your personal allowance is more than the BIK value of the car. But it's not as if you're getting some extra allowance, you get the personal allowance anyway.


As Smartie has pointed out, if fuel for private use is provided then there will be additional tax to pay for that.

[Deva Link]

TB Rich said:

I think I've worked it out now, is this right?

My tax code is 552L, so thats £5229 personal allowance. Subtract the benifit in kind value (£2453) from my PA = £2776.

552 = £5520 !

TB Rich said:

2nd issue is fuel, its a fuel card so everything goes on that. Personal mileage is not granted so I presume in effect I pay it back through tax. I don't do many personal miles right now, about £40 fuel on average so would it be safe to estimate a similar cost but only in tax?

You need to check your company proceedure for repaying private mileage - the normal way is to pay your company xx pence per mile for private use.

[japhilip]

You ought to clarify the personal fuel mileage, as it's quite tax heavy if the company pays your personal fuel. Only works out cheaper if you do lot's of personal mileage.

I note you say personal is not included. This should (!) mean that you put your own fuel in it for personal mileage, but you may be required to keep a mileage log etc, and repay any personal. Maybe your finance director or fleet manager (if you have one) could explain.