Company car allowance - anyone in the know?
Discussion
I'm in the very fortunate position of being offered a new job. The offer landed yesterday and I have accepted in principle but am a little unsure as to how good the car allowance.
My current role includes a company car, my employer leases through Lex, I get taxed BIK and the car's fully serviced and insured. My new employer doesn't do this and instead pays a car allowance with which (as far as I understand) I will need to get a car, insure and maintain.
I would anticipate that I'll be doing in excess of 30k miles a year which obviously makes anything like a pcp massively expensive. Car allowance I have been quoted is £350 per month. I'm assuming that I won't pay BIK on the car but instead that my allowance is subject to PAYE tax and ni.
Anyone with experience of this type of scheme able to give me some advice on whether this seems like a fair allowance and what the tax implications are?
Thanks in advance.
My current role includes a company car, my employer leases through Lex, I get taxed BIK and the car's fully serviced and insured. My new employer doesn't do this and instead pays a car allowance with which (as far as I understand) I will need to get a car, insure and maintain.
I would anticipate that I'll be doing in excess of 30k miles a year which obviously makes anything like a pcp massively expensive. Car allowance I have been quoted is £350 per month. I'm assuming that I won't pay BIK on the car but instead that my allowance is subject to PAYE tax and ni.
Anyone with experience of this type of scheme able to give me some advice on whether this seems like a fair allowance and what the tax implications are?
Thanks in advance.
northandy said:
Seems a bit stingy if that's £350 a month gross. Like others said what pence per mile do they pay?.
For reference our lowest level of car allowance is £580 a month, up to I think £750 a month.
I'm unsure as to what rate they pay per mile as I've only received the initial offer so far. I currently submit all fuel receipts which are reimbursed less private miles at the HMRC rate (12p/mile I think). If the new employer is going to pay me per mile would this also be meant for upkeep / wear and tear or just for the fuel costs? Sorry if I'm being a little vague, until I get all the paperwork through I'm a little in the dark too I'm afraid!For reference our lowest level of car allowance is £580 a month, up to I think £750 a month.
You are right on the tax/BiK front.
£350/mth is mean if you claim business miles at, say, 20p/mile. But good if you can claim 45p/25p HMRC rate.
You need all facts to make an informed decision.
I've found that a company car is often the cheapest way to beast 100k miles onto a brand new E-class over 3 years - but I've always opted out so that I can run older / cheaper cars as a daily and put more into the fun car.
£350/mth is mean if you claim business miles at, say, 20p/mile. But good if you can claim 45p/25p HMRC rate.
You need all facts to make an informed decision.
I've found that a company car is often the cheapest way to beast 100k miles onto a brand new E-class over 3 years - but I've always opted out so that I can run older / cheaper cars as a daily and put more into the fun car.
As Matt said, it is hard to comment without knowing how much you can claim per mile for business use.
If you can claim 45p per mile ( for the first 10,000 miles) then 25 p for miles after that then the allowance is quite good.
If you can only claim the same as a company car (14 p per mile or so dependant upon engine size) then it is not a very generous allowance.
It also depends on whether there are any restrictions on what car you can spend your allowance on. I used my car allowance to buy a 911, but some employers insist upon cars below a certain age and a minimum number of doors etc.
If you can claim 45p per mile ( for the first 10,000 miles) then 25 p for miles after that then the allowance is quite good.
If you can only claim the same as a company car (14 p per mile or so dependant upon engine size) then it is not a very generous allowance.
It also depends on whether there are any restrictions on what car you can spend your allowance on. I used my car allowance to buy a 911, but some employers insist upon cars below a certain age and a minimum number of doors etc.
Edited by jkh112 on Saturday 13th December 17:18
Thanks for the replies all! As I thought, it seems that I need to get more info before I know whether I need to try and negotiate a more generous allowance or not. The thing which has stumped me is that it's not a case of opting out of the company car scheme, it's that there's no option other than the allowance, and as I have no experience of this type of scheme I really don't want to get stung.
The job is a field based role and if I have to do 30-40k p/a in a boggo car with seats that will cripple me then I would imagine going to work would become tiresome quite quickly! I would assume there won't be many restrictions on the type of car other than possibly age. In fact probably the less 'exec' or 'corporate' the image the better. Looking at Volvos at the mo, maybe vw but other than that I'm a bit stumped, 911 although lovely may be a little flash for what I'm doing!
The job is a field based role and if I have to do 30-40k p/a in a boggo car with seats that will cripple me then I would imagine going to work would become tiresome quite quickly! I would assume there won't be many restrictions on the type of car other than possibly age. In fact probably the less 'exec' or 'corporate' the image the better. Looking at Volvos at the mo, maybe vw but other than that I'm a bit stumped, 911 although lovely may be a little flash for what I'm doing!
I've known companies pay a low allowance but still pay the 45p for the first 10k miles and 25p after, which can make it quite lucrative.
For the amount of miles you'll be doing if it's only 350 gross plus the lower rates it seems very thin to get a decent car.
Are there any restrictions if you take the allowance some companies say you need a car less than 4 years old etc
For the amount of miles you'll be doing if it's only 350 gross plus the lower rates it seems very thin to get a decent car.
Are there any restrictions if you take the allowance some companies say you need a car less than 4 years old etc
northandy said:
I've known companies pay a low allowance but still pay the 45p for the first 10k miles and 25p after, which can make it quite lucrative.
For the amount of miles you'll be doing if it's only 350 gross plus the lower rates it seems very thin to get a decent car.
Are there any restrictions if you take the allowance some companies say you need a car less than 4 years old etc
This is the thing - I went out today all full of hope, excitement and possibly naivety, got to the first dealer and quickly realised £350/mth gross will not go far at all. It now seems that viability of this allowance rests on the rate they pay per mile. At least there's a glimmer of hope!For the amount of miles you'll be doing if it's only 350 gross plus the lower rates it seems very thin to get a decent car.
Are there any restrictions if you take the allowance some companies say you need a car less than 4 years old etc
Haven't been told of any restrictions thus far, but wouldn't be surprised if the insist on a car no older than x years old.
Surely if you are being taxed on your allowance at your highest rate of tax - thats it, whatever is left is left... mines 700 and I pay tax at 40% on that.
You then get for business miles the 45p/25p allowance from HMRC less whatever the company pays you as an interim payment - usually based on an amount per mile - our firm offers about 12p. You claim the difference back from HMRC.
I've been doing this for about 15 years now - and have been audited by an HMRC inspector once and they agreed that this was the correct mechanism.
S.
You then get for business miles the 45p/25p allowance from HMRC less whatever the company pays you as an interim payment - usually based on an amount per mile - our firm offers about 12p. You claim the difference back from HMRC.
I've been doing this for about 15 years now - and have been audited by an HMRC inspector once and they agreed that this was the correct mechanism.
S.
I've just been calculating if it's better to get a petrol over 2 litres or under 2 litres as my company gives the HMRC approved rates for PPM and just noticed the Government have revised the rates as of 1st December, seems they're taking into account the lower fuel price by dropping them 1ppm.
Currently my man maths has a 335i over a Golf R as I get an extra 7ppm for having the larger engine, though i haven't calculated the claiming tax back on a P87.
Currently my man maths has a 335i over a Golf R as I get an extra 7ppm for having the larger engine, though i haven't calculated the claiming tax back on a P87.
51mes said:
swerni said:
No
What you claim back is the tax on the difference, not the difference
Yep sorry - do'h you claim the difference (i.e. that is the value you put into your self assessment form) and they refund you the tax on that amount...What you claim back is the tax on the difference, not the difference
S.
Yikes this is getting more complicated with every reply!
swerni said:
If they pay you 15p a mile and the HMRC rate for the first 10,000 miles remains at 45p, you can claim the tax back on 30p for each of those miles.
The exact amount you get back depends on the higher rate of tax you're paying.
For example, If you're paying 40% tax you get back 12p per mile for the first 10,000
This. And for what it's worth I would expect somewhere between £550 and £750/mth depending on seniority and status of the role. The exact amount you get back depends on the higher rate of tax you're paying.
For example, If you're paying 40% tax you get back 12p per mile for the first 10,000
If you're doing 30k miles a year, £350/month gross is a poor show. You've got to pay your own insurance so that will be make or break. If you live in a city, have little or no ncb, perhaps aren't that old, it could cost you a fortune and really eat into your allowance. Even if they are paying you the full 45p/25p mileage allowance, it's going to be tight.
And whereas you previous co car was a fixed cost, this isn't. Have an accident and get his with the excess, or run over a broken bottle and do a couple of tyres, and it's all going to add to your costs.
Think you need to get all the info off the new employers and do some very careful research when choosing your car. Make the wrong choice and you could end up paying to work for them!!
And whereas you previous co car was a fixed cost, this isn't. Have an accident and get his with the excess, or run over a broken bottle and do a couple of tyres, and it's all going to add to your costs.
Think you need to get all the info off the new employers and do some very careful research when choosing your car. Make the wrong choice and you could end up paying to work for them!!
Matt UK said:
You are right on the tax/BiK front.
£350/mth is mean if you claim business miles at, say, 20p/mile. But good if you can claim 45p/25p HMRC rate.
You need all facts to make an informed decision.
I've found that a company car is often the cheapest way to beast 100k miles onto a brand new E-class over 3 years - but I've always opted out so that I can run older / cheaper cars as a daily and put more into the fun car.
I would say the 45/25p is the least you should expect if the allowance is only 350 per month, A job that entails doing 30k+ a year should include a decent allowance of say £500-600 + 45/25 or a fully expensed car. £350/mth is mean if you claim business miles at, say, 20p/mile. But good if you can claim 45p/25p HMRC rate.
You need all facts to make an informed decision.
I've found that a company car is often the cheapest way to beast 100k miles onto a brand new E-class over 3 years - but I've always opted out so that I can run older / cheaper cars as a daily and put more into the fun car.
IN
Allowance
Mileage rate
Tax Reclaimed on mileage paid less than mileage rate allowed
Part ex on car when you sell it (if you buy it)
OUT
Tax on Allowance
NI on allowance (If you are not paying max before allowance)
Fuel cost
Insurance
Maintenance
Repairs
Vehicle Excise Duty
Cost of loan OR
Cost of car and Loss of interest on removing savings.
To give you an idea on leasing costs at 30 k pa there are a couple of websites that quote online for 30k pa mileage.
www.firstvehicleleasing.co.uk/
http://www.centralukvehicleleasing.co.uk/
Clue: it's horrendous
Is there an age limit on the car you have to have?
If not you could buy a petrol jag x type (2.1)or an E46 330 beemer and claim 24ppm if you're on government mileage rates
Allowance
Mileage rate
Tax Reclaimed on mileage paid less than mileage rate allowed
Part ex on car when you sell it (if you buy it)
OUT
Tax on Allowance
NI on allowance (If you are not paying max before allowance)
Fuel cost
Insurance
Maintenance
Repairs
Vehicle Excise Duty
Cost of loan OR
Cost of car and Loss of interest on removing savings.
To give you an idea on leasing costs at 30 k pa there are a couple of websites that quote online for 30k pa mileage.
www.firstvehicleleasing.co.uk/
http://www.centralukvehicleleasing.co.uk/
Clue: it's horrendous
Is there an age limit on the car you have to have?
If not you could buy a petrol jag x type (2.1)or an E46 330 beemer and claim 24ppm if you're on government mileage rates
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