Opting out Company Car Scheme Advice
Discussion
Hello my dad has had his company car scheme list come through and has decided enough is enough and wants to opt out if the figures work out. His list includes things such as a 1.6 ford focus etc... with the highlight being a passat 1.6tdi blue motion none of which really floats his boat so has decided to pick up something like a 320d a few years around for around the 14k mark if he opts out.
In terms of the scheme he will be paid an extra £6,500 a year but presume he will have to pay tax on this making it more like 4k?
Also he will be paid 19p per mile but has been told can claim some more back from the government just wondered how this works as he will be doing circa 25k miles per year and also if the 19p per mile will be taxed as well?
To me it seems like a good deal even at 19p should easily cover his diesels costs and will be getting an extra 4k a year as well as saving over 2k in costs for the company car tax and fuel allowance he pays on his mondeo at the moment.
In terms of car I personally recommended a 320d as should do an easy 45mpg and more than quick enough for his needs although he seems to be more keen on a new shape a4 at the moment which personally I don't like...
Just wanted some answers with regards to claiming for the extra mileage, whether tax has to be paid and if it seems like a good deal as it does to me considering how s
t his choice of company car is on the list 
In terms of the scheme he will be paid an extra £6,500 a year but presume he will have to pay tax on this making it more like 4k?
Also he will be paid 19p per mile but has been told can claim some more back from the government just wondered how this works as he will be doing circa 25k miles per year and also if the 19p per mile will be taxed as well?
To me it seems like a good deal even at 19p should easily cover his diesels costs and will be getting an extra 4k a year as well as saving over 2k in costs for the company car tax and fuel allowance he pays on his mondeo at the moment.
In terms of car I personally recommended a 320d as should do an easy 45mpg and more than quick enough for his needs although he seems to be more keen on a new shape a4 at the moment which personally I don't like...
Just wanted some answers with regards to claiming for the extra mileage, whether tax has to be paid and if it seems like a good deal as it does to me considering how s
t his choice of company car is on the list Go for something older and more fun (if he can stand the fuel costs). I get £6k a year then 30p per mile. I claim back 15p per mile from the tax man (45p per mile allowed up to 10k miles).
Above 10k miles he can claim back the difference up to 25p per mile (in my case I have to pay tax on the extra 5p a mile I get grrr).
I currently run a 3.0 v6 vauxhall omega. Taking depreciation and all running costs into account (I even record 99p bottles of screenwash!) I make around £1k a year profit on the deal.
I am about to replace the omega with either a V8 jag S type or a V8-R for around £6k-£7k. With the extra fuel costs of the V8-R I expect to break even.
Above 10k miles he can claim back the difference up to 25p per mile (in my case I have to pay tax on the extra 5p a mile I get grrr).
I currently run a 3.0 v6 vauxhall omega. Taking depreciation and all running costs into account (I even record 99p bottles of screenwash!) I make around £1k a year profit on the deal.
I am about to replace the omega with either a V8 jag S type or a V8-R for around £6k-£7k. With the extra fuel costs of the V8-R I expect to break even.
Dodsy said:
Go for something older and more fun (if he can stand the fuel costs). I get £6k a year then 30p per mile. I claim back 15p per mile from the tax man (45p per mile allowed up to 10k miles).
Above 10k miles he can claim back the difference up to 25p per mile (in my case I have to pay tax on the extra 5p a mile I get grrr).
I currently run a 3.0 v6 vauxhall omega. Taking depreciation and all running costs into account (I even record 99p bottles of screenwash!) I make around £1k a year profit on the deal.
I am about to replace the omega with either a V8 jag S type or a V8-R for around £6k-£7k. With the extra fuel costs of the V8-R I expect to break even.
So for the first 10k he can claim up to 45p and then 25p afterwards is this correct?Above 10k miles he can claim back the difference up to 25p per mile (in my case I have to pay tax on the extra 5p a mile I get grrr).
I currently run a 3.0 v6 vauxhall omega. Taking depreciation and all running costs into account (I even record 99p bottles of screenwash!) I make around £1k a year profit on the deal.
I am about to replace the omega with either a V8 jag S type or a V8-R for around £6k-£7k. With the extra fuel costs of the V8-R I expect to break even.
How much tax would he have to pay on the mileage he earns around 60k a year so not sure how he affects this?
With regards to car cant see him getting a petrol told him to consider maybe a 330i as said would do around 30mpg still and be a nicer drive but seems to be set on something as economical as possible. To be honest he does not really care about cars much had a couple of nice ones in the past but has had 25k set aside for a fun car for a few years now and has still not brought one
As it is think best he may go for is a 330d but even when he test drove one of those he said that it was too fast for him all he has really had is 2.0tdi rep mobiles for the last 10 years with circa 130/140bhp so even a 320d feel quite fast too him and too be honest it is all the car he will need may try and lead him back into a 330d though was amazed how quickly it picked up on the test drive the BMW bloke looked quite worried...
greggy50 said:
So for the first 10k he can claim up to 45p and then 25p afterwards is this correct?
How much tax would he have to pay on the mileage he earns around 60k a year so not sure how he affects this?
Be careful with this - a lot of people mis-understand it, and think they will get the full 25/45p amounts.How much tax would he have to pay on the mileage he earns around 60k a year so not sure how he affects this?
If the firm pay him 19p a mile then for the first 10K miles he can get a tax rebate of the difference between 19p and 45p. So the difference is 26p and he gets the tax back on that which at 40% = 10.4p (plus the 19p from the firm).
For mileage over 10K, the HMRC rate is 25p, so he gets 40% of 6p = 2.4p (+the 19p again).
You only PAY tax on the mileage rates if your firm pays more than the HMRC rates of 45p/25p (bizzarely, some local councils etc, still do).
ETA: Use http://www.cashorcar.co.uk and let it do the calcs for your Dad.
And don't forget that although he will pay tax on the payment from his company, he will not be paying BIK tax on a company car, so you can add back what he's currently paying (or would be paying with a new car) onto your estimate of £4000 per year.
At the rates quoted, it sounds like a good move to opt out.
At the rates quoted, it sounds like a good move to opt out.
Deva Link said:
Be careful with this - a lot of people mis-understand it, and think they will get the full 25/45p amounts.
If the firm pay him 19p a mile then for the first 10K miles he can get a tax rebate of the difference between 19p and 45p. So the difference is 26p and he gets the tax back on that which at 40% = 10.4p (plus the 19p from the firm).
For mileage over 10K, the HMRC rate is 25p, so he gets 40% of 6p = 2.4p (+the 19p again).
You only PAY tax on the mileage rates if your firm pays more than the HMRC rates of 45p/25p (bizzarely, some local councils etc, still do).
ETA: Use http://www.cashorcar.co.uk and let it do the calcs for your Dad.
Okay so from what I can make out If the firm pay him 19p a mile then for the first 10K miles he can get a tax rebate of the difference between 19p and 45p. So the difference is 26p and he gets the tax back on that which at 40% = 10.4p (plus the 19p from the firm).
For mileage over 10K, the HMRC rate is 25p, so he gets 40% of 6p = 2.4p (+the 19p again).
You only PAY tax on the mileage rates if your firm pays more than the HMRC rates of 45p/25p (bizzarely, some local councils etc, still do).
ETA: Use http://www.cashorcar.co.uk and let it do the calcs for your Dad.
He is paid an extra 6.5k a year which therefore works out at 4k after tax
He gets 10k miles paid at 29p per mile after tax which is circa £2,900
He then gets the following 15k miles paid at 21.4p which is circa £3,210
I make that each year he will get £10,110 per year to buy and run a car including fuel plus a saving of circa 2k on company car tax and fuel allowance sounds like a no brainer to me...
Worked out the fuel for 25k miles at circa 45mpg will cost him around £3,500 a year so still gives around £5,000 a year in his pocket extra after cost of insurance and servicing so after 3 years this will cover the cost of the car which he can then sell on for around maybe 7k as well as having saved 6k over the 3 years in company car tax costs...
Let me know if any of this seems miles out as working it out for him
greggy50 said:
Okay so from what I can make out
He is paid an extra 6.5k a year which therefore works out at 4k after tax
He gets 10k miles paid at 29p per mile after tax which is circa £2,900
He then gets the following 15k miles paid at 21.4p which is circa £3,210
I make that each year he will get £10,110 per year to buy and run a car including fuel plus a saving of circa 2k on company car tax and fuel allowance sounds like a no brainer to me...
Worked out the fuel for 25k miles at circa 45mpg will cost him around £3,500 a year so still gives around £5,000 a year in his pocket extra after cost of insurance and servicing so after 3 years this will cover the cost of the car which he can then sell on for around maybe 7k as well as having saved 6k over the 3 years in company car tax costs...
Let me know if any of this seems miles out as working it out for him
You might also want to consider the amount of the mileage that is personal as he won't (or at least I wouldn't have thought) he'll be able to claim that back. Otherwise he'll end up paying BIK for fuel!He is paid an extra 6.5k a year which therefore works out at 4k after tax
He gets 10k miles paid at 29p per mile after tax which is circa £2,900
He then gets the following 15k miles paid at 21.4p which is circa £3,210
I make that each year he will get £10,110 per year to buy and run a car including fuel plus a saving of circa 2k on company car tax and fuel allowance sounds like a no brainer to me...
Worked out the fuel for 25k miles at circa 45mpg will cost him around £3,500 a year so still gives around £5,000 a year in his pocket extra after cost of insurance and servicing so after 3 years this will cover the cost of the car which he can then sell on for around maybe 7k as well as having saved 6k over the 3 years in company car tax costs...
Let me know if any of this seems miles out as working it out for him
If 10k miles is a reasonable assumption for personal then you need to readjust your calcs
Super Injunction said:
You might also want to consider the amount of the mileage that is personal as he won't (or at least I wouldn't have thought) he'll be able to claim that back. Otherwise he'll end up paying BIK for fuel!
If 10k miles is a reasonable assumption for personal then you need to readjust your calcs
His personal mileage will be extremely low circa 2k miles a year and with his company they will be quite relaxed in how they pay this... If 10k miles is a reasonable assumption for personal then you need to readjust your calcs
He has to travel all over the UK as is a senior contracts manager so would be quite easy for him to erm adjust his business mileage to suit and the cost of the additional private mileage will be marginal to be honest.
greggy50 said:
Let me know if any of this seems miles out as working it out for him
That looks OK, but use the calculator I linked to to check.For 40% tax payers doing medium mileages in higher CO2 cars it usually makes financial sense to opt out.
Bear in mind there's a "peace of mind" benefit in having a company car - depends on your mentality but to be honest I hate using my own car for business, leaving it in dodgy hotel car parks overnight etc. If your company car makes a funny noise then you turn the radio up, if it's your own car you start to see big bills flashing in front of your eyes.
Deva Link said:
That looks OK, but use the calculator I linked to to check.
For 40% tax payers doing medium mileages in higher CO2 cars it usually makes financial sense to opt out.
Bear in mind there's a "peace of mind" benefit in having a company car - depends on your mentality but to be honest I hate using my own car for business, leaving it in dodgy hotel car parks overnight etc. If your company car makes a funny noise then you turn the radio up, if it's your own car you start to see big bills flashing in front of your eyes.
Yeah my dad does drive his cars hard blew the engine on one about 5 years ago...For 40% tax payers doing medium mileages in higher CO2 cars it usually makes financial sense to opt out.
Bear in mind there's a "peace of mind" benefit in having a company car - depends on your mentality but to be honest I hate using my own car for business, leaving it in dodgy hotel car parks overnight etc. If your company car makes a funny noise then you turn the radio up, if it's your own car you start to see big bills flashing in front of your eyes.
However with his own he would look after it and we have a good friend of the family who can deal with all the servicing cheaply were anything to go wrong so he will be able to deal with those side of the issues.
Just seems a no brainier with the figures he stands to rake in (including comp car tax savings) easily clear 10k profit over the 3 years allowing a couple of grand for if something major goes wrong so will certainly recommend it to him. He may even be tempted by a petrol when he sees he can get more than 19p a mile which would be nice.
I have gone through the same thought every time my car comes up for renewal - as I would have to buy the car (which wouldn't be the same standard of the new one through the company car scheme) I could never see any big enough gains to make it worth while. For a lot of gain I could see the benefit but for marginal increases I've never been able to opt out
Here is a quick calc of my take on it, always works out better if you already have a car and have the option to 'opt in' and take the cash but i'm not in that situation.
Annual numbers:
Outgoings
Car 6,450.00 (3 year full purchase @ 5% interest)
Fuel 3,544.44
2 services 400.00
4 tyres 800.00
Tax 150.00
Insurance 350.00
Just in case' 500.00
Total Outgoings 12,194.44
Incoming
Fuel 5,200.00
Car value appreciation 1,666.67 Say car depreciates to £5k after 3 years - add as 'income'
Car allowance 3,900.00
Gain in income tax 1,400.00 Guess - depends on current car value and emissions
Total income 12,166.67
Here is a quick calc of my take on it, always works out better if you already have a car and have the option to 'opt in' and take the cash but i'm not in that situation.
Annual numbers:
Outgoings
Car 6,450.00 (3 year full purchase @ 5% interest)
Fuel 3,544.44
2 services 400.00
4 tyres 800.00
Tax 150.00
Insurance 350.00
Just in case' 500.00
Total Outgoings 12,194.44
Incoming
Fuel 5,200.00
Car value appreciation 1,666.67 Say car depreciates to £5k after 3 years - add as 'income'
Car allowance 3,900.00
Gain in income tax 1,400.00 Guess - depends on current car value and emissions
Total income 12,166.67
At £25k a year I'd probably be doing the opposite, but it does depend a lot on what restrictions the company places on car allowance - some can be quite restrictive, especially on age/mileage.
Don't forget to factor in general increases (insurance gets more expensive, as do services, tyres, fuel, etc) and some contingency for running a car out of warranty.
As Deva Link says, there's some value in just picking a utility car off a list, not worrying about finance, insurance, servicing, tyres, parking it in dodgy places, etc until 3 years later when you pick a new one.
Don't forget to factor in general increases (insurance gets more expensive, as do services, tyres, fuel, etc) and some contingency for running a car out of warranty.
As Deva Link says, there's some value in just picking a utility car off a list, not worrying about finance, insurance, servicing, tyres, parking it in dodgy places, etc until 3 years later when you pick a new one.
Just got these figures together for my dad to give him an idea of costs over 3 years
BMW 320d with circa 40k miles = £13,000
Three Years fuel at circa 45mpg based at £6.50 a gallon = £11,000
Three Years Insurance = £2,000
Three Years Running Costs = £5,000
Total Cost Over 3 years = approx £32,000
Income
£4,000 after tax = £12,000
Fuel Income
30k Miles over 3 years at 29p = £8,700 approx
45k Miles over 3 years at 21.4p = £9,650 approx
Total Income over 3 years = £30,350
After 3 years sell BMW 320d with circa 135k miles for £6,500
Saving on Company Car Tax Over 3 years = £6,500
£32,000 (Running Cost) - £30,350 (Income) = £1,650 Defect
£6,500 + £6,500 = £13,000 - £1,650 = £11,350 better off after tax over 3 years
So basically from what I can see he will be nearly 4k a year better off and will be driving around in a better car seems like an obvious choice to me personally feel free to rip my figures apart
BMW 320d with circa 40k miles = £13,000
Three Years fuel at circa 45mpg based at £6.50 a gallon = £11,000
Three Years Insurance = £2,000
Three Years Running Costs = £5,000
Total Cost Over 3 years = approx £32,000
Income
£4,000 after tax = £12,000
Fuel Income
30k Miles over 3 years at 29p = £8,700 approx
45k Miles over 3 years at 21.4p = £9,650 approx
Total Income over 3 years = £30,350
After 3 years sell BMW 320d with circa 135k miles for £6,500
Saving on Company Car Tax Over 3 years = £6,500
£32,000 (Running Cost) - £30,350 (Income) = £1,650 Defect
£6,500 + £6,500 = £13,000 - £1,650 = £11,350 better off after tax over 3 years
So basically from what I can see he will be nearly 4k a year better off and will be driving around in a better car seems like an obvious choice to me personally feel free to rip my figures apart
FreeLitres said:
OP - think about depreciation and the fact that any "profits" would possibly be used to fund the new car. Would he be buying a personal car, or leasing it?
Buying the car my dad had circa 25k/30k set aside for a fun car along with a slush fund but lost his nerve so paying 12/13k for a 320d wont be an issue no finance needed etc...Looks like there are a couple of risks...
£5k for runnign costs is probably OK as long as nothing major goes wrong - the car likely to be out of warantee at 3/4y/o with 40k miles.
Is a 7 y/o 320d with 135k miles going to fetch £6.5k? I'd have thought it would be worth peanuts... or at least be very hard to shift (though obviously could chop it against the next purchase and let the dealer off load it through the auctions).
Whenever I've done this calculation it has only made sense if the car is a lot older than I can get through my scheme AND I'm prepared to take the risk on.
If he's got the money why not take the company car for work and buy something fun for personal use?
£5k for runnign costs is probably OK as long as nothing major goes wrong - the car likely to be out of warantee at 3/4y/o with 40k miles.
Is a 7 y/o 320d with 135k miles going to fetch £6.5k? I'd have thought it would be worth peanuts... or at least be very hard to shift (though obviously could chop it against the next purchase and let the dealer off load it through the auctions).
Whenever I've done this calculation it has only made sense if the car is a lot older than I can get through my scheme AND I'm prepared to take the risk on.
If he's got the money why not take the company car for work and buy something fun for personal use?
£6.5k value with 135k on a 320d SE 7 years old!!!
Um zero chance of that.
If they value my 6-7 year old 330d m sport auto with all the toys and 90k for £7k your WAY off the mark.
Honestly thugs will wear out and he needs a working car so if it breaks down he will have to have a hire car.
Also the company need a vat registered evidence of the servicing DIY isn't an option none of the companies I've worked in allow DIY as it foes against the H&S of the onoany. Ie another member of staff can rightly drive your dads owned opt out car or be a passenger which has been services by a non qualified mechanical engineer.
Sadly lots of DIY servicing is of much better standard but there you go.
Personally I opt out and when I did the maths provided your milage is under 16k opt out over that you may as well opt in.
Plus that Passat 1.6 tdi really is a nice car have been in it many times really comfy loads of kit lots of space a White goods a to b car which is a cut above the rest.
Also if he loses his job hand the keys back no worry. Or if he changes company they may not allow him to opt out then have a for Ed fire sale of the car or dual car costs
Um zero chance of that.
If they value my 6-7 year old 330d m sport auto with all the toys and 90k for £7k your WAY off the mark.
Honestly thugs will wear out and he needs a working car so if it breaks down he will have to have a hire car.
Also the company need a vat registered evidence of the servicing DIY isn't an option none of the companies I've worked in allow DIY as it foes against the H&S of the onoany. Ie another member of staff can rightly drive your dads owned opt out car or be a passenger which has been services by a non qualified mechanical engineer.
Sadly lots of DIY servicing is of much better standard but there you go.
Personally I opt out and when I did the maths provided your milage is under 16k opt out over that you may as well opt in.
Plus that Passat 1.6 tdi really is a nice car have been in it many times really comfy loads of kit lots of space a White goods a to b car which is a cut above the rest.
Also if he loses his job hand the keys back no worry. Or if he changes company they may not allow him to opt out then have a for Ed fire sale of the car or dual car costs
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