Company cars - how do they work?
Discussion
This is also a cunningly disguised "what car thread"
So mrs morgrp has just had a rather handsome promotion at work and part of the package is the inclusion of a company car. Great stuff - trouble is, neither of us know eff-all about how they work. What is the best sort of car to go for? How does the taxation work? What engine/fuel option works best? I'm guessing the budget will be around 15-20k and i know her mileage only has to be 9k business miles a year
Secondary to this I'll be keeping my v70 t5 for the time being but we're thinking now that we'll have a company car to use as a family hack that maybe the morgrp's second car could be something smaller and more exciting - don't get me wrong, We both adore the t5 and its been a brilliant, fast, reliable and all round good egg of a motor but it's really too big and thirsty to be justified as a second car so any suggestions on the two cars would be appreciated!
Over to you...
So mrs morgrp has just had a rather handsome promotion at work and part of the package is the inclusion of a company car. Great stuff - trouble is, neither of us know eff-all about how they work. What is the best sort of car to go for? How does the taxation work? What engine/fuel option works best? I'm guessing the budget will be around 15-20k and i know her mileage only has to be 9k business miles a year
Secondary to this I'll be keeping my v70 t5 for the time being but we're thinking now that we'll have a company car to use as a family hack that maybe the morgrp's second car could be something smaller and more exciting - don't get me wrong, We both adore the t5 and its been a brilliant, fast, reliable and all round good egg of a motor but it's really too big and thirsty to be justified as a second car so any suggestions on the two cars would be appreciated!
Over to you...
I am not expert in this field but having had a couple of company cars in the past but it's based on the P11D value? and the Benefit In Kind (BIK)?
[Taken from Gov Website]
It's a bad description, and no doubt someone will be able to explain it better than I can?
There is a tax charge where, because of their employment, a car is made available to and is available for private use by a director or an employee earning £8,500 a year or more, or to a member of their family or household (a ‘company car’).
There is a further tax charge if free or subsidised fuel is provided for private use in a company car.
This page provides links to information and guidance for employees and employers about tax and NICs rules on company cars and company car fuel.
It also provides links to other guidance of interest to vehicle users.
http://www.hmrc.gov.uk/cars/
[Taken from Gov Website]
It's a bad description, and no doubt someone will be able to explain it better than I can?
There is a tax charge where, because of their employment, a car is made available to and is available for private use by a director or an employee earning £8,500 a year or more, or to a member of their family or household (a ‘company car’).
There is a further tax charge if free or subsidised fuel is provided for private use in a company car.
This page provides links to information and guidance for employees and employers about tax and NICs rules on company cars and company car fuel.
It also provides links to other guidance of interest to vehicle users.
http://www.hmrc.gov.uk/cars/
I've had company cars for the last 15 years and they are not that difficult to figure out. However, for your example it would be useful if you want help on choice to see what the list is/what are the rules. Also, business miles makes bugger all difference these days.
Firstly, the car. Whatever the scheme the car she gets will have two numbers you need - the P11d value (retail price inc delivery, options etc - you can't include discounts) and an approved CO2 figure. The CO2 figure will tell you the tax liability percentage. The lower for both of these the cheaper it is. For my example, I have just got an A6 the figures are:
P11d - £36,000
CO2 - 129, this equates to 18% for this tax year.
@ 40& tax rate, my tax on this car is:
Tax liability - £36,000 * 18% + £6,480
Tax on this @ 40% is £6,480 * 40% = £2,582 per year / £216 per month
Fuel card - does she get free fuel for private use? If so do the same calculation on a notional value of £18,800 (or thereabouts, this is what HMRC say a fuel card is worth)
For me - £18,800 * 18% * 40% = £112.80 per month.
So for my 'free' car I pay an extra £328 per month
Firstly, the car. Whatever the scheme the car she gets will have two numbers you need - the P11d value (retail price inc delivery, options etc - you can't include discounts) and an approved CO2 figure. The CO2 figure will tell you the tax liability percentage. The lower for both of these the cheaper it is. For my example, I have just got an A6 the figures are:
P11d - £36,000
CO2 - 129, this equates to 18% for this tax year.
@ 40& tax rate, my tax on this car is:
Tax liability - £36,000 * 18% + £6,480
Tax on this @ 40% is £6,480 * 40% = £2,582 per year / £216 per month
Fuel card - does she get free fuel for private use? If so do the same calculation on a notional value of £18,800 (or thereabouts, this is what HMRC say a fuel card is worth)
For me - £18,800 * 18% * 40% = £112.80 per month.
So for my 'free' car I pay an extra £328 per month
Edited by Super Injunction on Wednesday 30th November 17:10
she'll probably have a list of cars to choose from, and can pay extra to choose a better car. If this is the bottom rung of the company car ladder (at her company) expect something around the diesel astra level.
she'll be responsible for tax on top of that. Company car tax is the bik rate (which ranges from about 13% to 35% depending on co2 and fuel type) times by her tax rate (probably 40%) times by the list price of the car
eg a astra is in the 20% bik rate due to emissions, and its list price is 20k
she'd pay 20,000x0.2x0.4 a year, or £133 a month.
she'll be responsible for tax on top of that. Company car tax is the bik rate (which ranges from about 13% to 35% depending on co2 and fuel type) times by her tax rate (probably 40%) times by the list price of the car
eg a astra is in the 20% bik rate due to emissions, and its list price is 20k
she'd pay 20,000x0.2x0.4 a year, or £133 a month.
There is unlikely to be a cash budget - just a list of stuff that comes under the company max. lease price - and these are usually decided upon by a lease company such as Lex, Leaseplan etc.
Low CO2 emissions are the key, as already posted - especially if combined with low list price.
The watch-out, for me, anyway, is Fords - high list prices mean they often come at a higher tax cost to the end user than equivalent cars from elsewhere.
Additionally, be aware that diesels are going to see increases in tax cost over the next 3 years, too.
The answer to the question is likely to be:
Toyota Auris HSD / Toyota Prius / Honda Insight, in that order.
Not the most exciting cars in the world, but the Toyotas, in particular, make excellent company cars as they're well equipped, comfortable and cost next to sod all in tax.
Low CO2 emissions are the key, as already posted - especially if combined with low list price.
The watch-out, for me, anyway, is Fords - high list prices mean they often come at a higher tax cost to the end user than equivalent cars from elsewhere.
Additionally, be aware that diesels are going to see increases in tax cost over the next 3 years, too.
The answer to the question is likely to be:
Toyota Auris HSD / Toyota Prius / Honda Insight, in that order.
Not the most exciting cars in the world, but the Toyotas, in particular, make excellent company cars as they're well equipped, comfortable and cost next to sod all in tax.
morgrp said:
So mrs morgrp has just had a rather handsome promotion at work and part of the package is the inclusion of a company car. Great stuff - trouble is, neither of us know eff-all about how they work. What is the best sort of car to go for? How does the taxation work? What engine/fuel option works best? I'm guessing the budget will be around 15-20k and i know her mileage only has to be 9k business miles a year
To be fair, none of us know eff-all about how your wife's employers' company car scheme works.Post up some info on that and then the advice will make sense (well, at least be more relevant).
There's not a lot of point in agonising about it until you know the details, and even then she might get stitched up with a dodgy old car that someone who has just left has handed back!
LooneyTunes said:
...but avoid any insurance, VED, and maintenance bills that you'd have running your own car. 
Very true I would have a lot more to spend as well if i opted out and took the cash option but with no equity to use, a very meagre discount on no claims trying to reach a like for like car was impossible.Super Injunction said:
I've had company cars for the last 15 years and they are not that difficult to figure out. However, for your example it would be useful if you want help on choice to see what the list is/what are the rules. Also, business miles makes bugger all difference these days.
Firstly, the car. Whatever the scheme the car she gets will have two numbers you need - the P11d value (retail price inc delivery, options etc - you can't include discounts) and an approved CO2 figure. The CO2 figure will tell you the tax liability percentage. The lower for both of these the cheaper it is. For my example, I have just got an A6 the figures are:
P11d - £36,000
CO2 - 129, this equates to 18% for this tax year.
@ 40& tax rate, my tax on this car is:
Tax liability - £36,000 * 18% + £6,480
Tax on this @ 40% is £6,480 * 40% = £2,582 per year / £216 per month
Fuel card - does she get free fuel for private use? If so do the same calculation on a notional value of £18,800 (or thereabouts, this is what HMRC say a fuel card is worth)
For me - £18,800 * 18% * 40% = £112.80 per month.
So for my 'free' car I pay an extra £328 per month
Its always scary when you do the calculations. you probably lose out on a 5-800/month car allowance too.Firstly, the car. Whatever the scheme the car she gets will have two numbers you need - the P11d value (retail price inc delivery, options etc - you can't include discounts) and an approved CO2 figure. The CO2 figure will tell you the tax liability percentage. The lower for both of these the cheaper it is. For my example, I have just got an A6 the figures are:
P11d - £36,000
CO2 - 129, this equates to 18% for this tax year.
@ 40& tax rate, my tax on this car is:
Tax liability - £36,000 * 18% + £6,480
Tax on this @ 40% is £6,480 * 40% = £2,582 per year / £216 per month
Fuel card - does she get free fuel for private use? If so do the same calculation on a notional value of £18,800 (or thereabouts, this is what HMRC say a fuel card is worth)
For me - £18,800 * 18% * 40% = £112.80 per month.
So for my 'free' car I pay an extra £328 per month
Edited by Super Injunction on Wednesday 30th November 17:10
its all about the mileage. if I did less than 20K/ year total I would run my own car as it is, my mileage is closer to 50K per year and it just don'r pay to run my own car.
RicksAlfas said:
http://www.comcar.co.uk/ Low CO2 is the key!
+1 I'm soon to change mine and will be intentionally downgrading to reduce tax liability to a minimum :. try looking at Saab 1.9tdi Sportswagons. Very very good mpg and tiny C02 emmissions to BHP/torque performance. And don't let the market pundits put you off looking at Saab.v8250 said:
RicksAlfas said:
http://www.comcar.co.uk/ Low CO2 is the key!
+1 I'm soon to change mine and will be intentionally downgrading to reduce tax liability to a minimum :. try looking at Saab 1.9tdi Sportswagons. Very very good mpg and tiny C02 emmissions to BHP/torque performance. And don't let the market pundits put you off looking at Saab.Gassing Station | General Gassing | Top of Page | What's New | My Stuff