Making a company car/allowance work best.
Discussion
Mrs Fungle currently has a Jaguar XE Portfolio with the 163hp diesel engine so it falls into the lowest emissions bracket.
As a 40% tax payer she is currently paying around £241pm BIK, she covers approx 17k personal miles and approx 5k business miles PA.
Her car allowance is £700 per month non-maintained, a car allowance of approx £550 is offered as an alternative.
£241 per month for a very nice Jaguar is not to be sniffed at but it could also go quite nicely into mortgage over payments.
Is there any way to make a company car as cost neutral as possible?
Comfort is a priority so suggesting a Toyota Aygo is a no go!
Although not a slave to a badge, she works hard enough to deserve a 'nice' car.
The new Volvo XC40 looks nice but the emissions will push the BIK up.
As a 40% tax payer she is currently paying around £241pm BIK, she covers approx 17k personal miles and approx 5k business miles PA.
Her car allowance is £700 per month non-maintained, a car allowance of approx £550 is offered as an alternative.
£241 per month for a very nice Jaguar is not to be sniffed at but it could also go quite nicely into mortgage over payments.
Is there any way to make a company car as cost neutral as possible?
Comfort is a priority so suggesting a Toyota Aygo is a no go!
Although not a slave to a badge, she works hard enough to deserve a 'nice' car.
The new Volvo XC40 looks nice but the emissions will push the BIK up.
Your post isn't that clear about the alternatives on offer. Do I read it that Mrs Fungle can choose a car up to £700pm or alternatively get a car allowance of £550pm? Is income tax payable on the £550?
As a rule of thumb taking the cash instead of the company car tends to work best if you are doing lots of business miles, as you then have lots of pences per mile to offset the maintenance and insurance costs. At 5000 business miles pa you'd probably be best to stick with the company car. No doubt someone will be along shortly with a spreadsheet to prove or disprove my perception!
So if you were to stick with the company car the only way to make it more tax efficient is to pick something less expensive, or with lower CO2 or both.
Golf GTE is taxed at 9% of £31045, giving a BIK of about £2800 so 40% tax payer will pay £1120pa / £93pm.
Must be other electric / hybrid stuff with similar numbers. This might be a good site to look for alternatives: http://www.nextgreencar.com/company-car-tax/make-m...
As a rule of thumb taking the cash instead of the company car tends to work best if you are doing lots of business miles, as you then have lots of pences per mile to offset the maintenance and insurance costs. At 5000 business miles pa you'd probably be best to stick with the company car. No doubt someone will be along shortly with a spreadsheet to prove or disprove my perception!
So if you were to stick with the company car the only way to make it more tax efficient is to pick something less expensive, or with lower CO2 or both.
Golf GTE is taxed at 9% of £31045, giving a BIK of about £2800 so 40% tax payer will pay £1120pa / £93pm.
Must be other electric / hybrid stuff with similar numbers. This might be a good site to look for alternatives: http://www.nextgreencar.com/company-car-tax/make-m...
Wooda80 said:
As a rule of thumb taking the cash instead of the company car tends to work best if you are doing lots of business miles, as you then have lots of pences per mile to offset the maintenance and insurance costs. At 5000 business miles pa you'd probably be best to stick with the company car. No doubt someone will be along shortly with a spreadsheet to prove or disprove my perception!
I'd have said it works best if doing around 10K business miles so you can maximise the 45p per mile rate. Coupled with minimal private mileage so you don't bump up the overall mileage it brings significant extra service and maint costs, and impacts the cars value.In the OP's wife's case, if taking a similar value of new car, it'd probably be a pretty even call. However as BIK rates increase it should be more favourable to opt out. Agree it's odd the opt out amount is lower than if taking company car but maybe the firm pays a high business mileage rate?
check the companies rules and regs on car choice when taking the allowance, the company my Mrs works for gives generous car allowances but you have to choose off an approved list if if new , no more than 6 years old and no more than 100k miles , and it's 4 doors only . All choices have to be approved too .
This is to ensure the allowance pays for the car , not your mortgage!
This is to ensure the allowance pays for the car , not your mortgage!
In that case, it’ll have to be a bmw 530e.
And if you don’t like that, then there’s no hope!
The Teslas have a high list price hence you get killed on the BIK. I’ve always found the 330e is the most cost effective of the current crop of hybrids on our company scheme as they’re relatively cheap for what they are.
Since you don’t like the interior then the new 530e is an alternative and the interior is a rather nice place to be. Still not as cost effective as the 330e mind...
And if you don’t like that, then there’s no hope!
The Teslas have a high list price hence you get killed on the BIK. I’ve always found the 330e is the most cost effective of the current crop of hybrids on our company scheme as they’re relatively cheap for what they are.
Since you don’t like the interior then the new 530e is an alternative and the interior is a rather nice place to be. Still not as cost effective as the 330e mind...
jonlk said:
Morning all,
Has anyone had any further ideas re. A company car which is interesting but not hugely punitive on tax?
I don’t think there are many options at all, the tax keeps getting cranked up!Has anyone had any further ideas re. A company car which is interesting but not hugely punitive on tax?
I have a similar cash opt out allowance but at present have an XF. I got rid of the fuel card recently as even on 18k personal miles a year it works out cheaper for me to use my own cash.
I’m convinced that you are better off opting out and buying something nearly new if you want to go down the “interesting” route.
If you don’t get a cash option the tax on the car feels like good value but if you do get a cash option and you surrender it, the knock on take home pay is significant.
Jag_NE said:
jonlk said:
Morning all,
Has anyone had any further ideas re. A company car which is interesting but not hugely punitive on tax?
I don’t think there are many options at all, the tax keeps getting cranked up!Has anyone had any further ideas re. A company car which is interesting but not hugely punitive on tax?
I have a similar cash opt out allowance but at present have an XF. I got rid of the fuel card recently as even on 18k personal miles a year it works out cheaper for me to use my own cash.
I’m convinced that you are better off opting out and buying something nearly new if you want to go down the “interesting” route.
If you don’t get a cash option the tax on the car feels like good value but if you do get a cash option and you surrender it, the knock on take home pay is significant.
From research it's definitely not a perk anymore!
jonlk said:
Morning all,
Has anyone had any further ideas re. A company car which is interesting but not hugely punitive on tax?
A DC pick-up.Has anyone had any further ideas re. A company car which is interesting but not hugely punitive on tax?
£1340 per annum tax for a 40% tax payer.
https://www.businessvans.co.uk/van-tax/van-tax-dou...
Just ensure it fits in the rules, i.e. Payload of > 1 tonne (ideally 1050kg so to allow for the fitment of a canopy with a nominal weight of 45kg).
A vehicle of this sort normally has:
- a front passenger cab that contains a second row of seats and is capable of seating about 4 passengers, plus the driver
- four doors capable of being opened independently, whether the rear doors are hinged at the front or the rear (two door versions are normally accepted to be vans) and
- an uncovered pick-up area behind the passenger cab.
jonlk said:
I can't disagree.
From research it's definitely not a perk anymore!
I agree I took a company car and only do about 10k miles a year which was a massive mistake. I am paying fortune in tax on a DS5 and turned down a £5.5k cash allowance I have one more year to go before I can give it back and just hope someone crashes into it. From research it's definitely not a perk anymore!
If you are doing 20k+ miles then it starts to make more sense as long as you can pick something like a C350e or Golf GTE which fall into the lower tax brackets.
What happens with regard to fuel/work mileage with the car allowance?
My company pays at company car rates, what this means however is that you have to hit or exceed the HMRC mpg that they base their rates on. So I have a >2l petrol as I only have to hit 24mpg to break even and as it'll do 32-36mpg on a run it means I get 8p/mile over and above fuel.
I can then claim the tax relief back of course between the HMRC payment and 45p and as you have a limit of 2.5k before you go self-assessed that gives you significant scope before you hit that. Also as it is tax *relief* you don't get that much back.
In comparison the diesel boys have to hit or better their claimed MPG...which is tricky at best, I know of a couple that are effectively subbing the company for business miles and most are only just breaking even!
Downside of course is that tax is high and the personal fuel bill is higher than something smaller/diesel but as I get that 8p/mile over and above on my business miles it effectively pays for a 1/3 of my personal miles and makes it not so painful and I get something more interesting.
Horses for courses but don't just assume a diesel is better, do *all* the sums.
My company pays at company car rates, what this means however is that you have to hit or exceed the HMRC mpg that they base their rates on. So I have a >2l petrol as I only have to hit 24mpg to break even and as it'll do 32-36mpg on a run it means I get 8p/mile over and above fuel.
I can then claim the tax relief back of course between the HMRC payment and 45p and as you have a limit of 2.5k before you go self-assessed that gives you significant scope before you hit that. Also as it is tax *relief* you don't get that much back.
In comparison the diesel boys have to hit or better their claimed MPG...which is tricky at best, I know of a couple that are effectively subbing the company for business miles and most are only just breaking even!
Downside of course is that tax is high and the personal fuel bill is higher than something smaller/diesel but as I get that 8p/mile over and above on my business miles it effectively pays for a 1/3 of my personal miles and makes it not so painful and I get something more interesting.
Horses for courses but don't just assume a diesel is better, do *all* the sums.
wemorgan said:
If she's doing 23k/yr and that costs £250/month I'd consider that cheap motoring.
You may find an old second-hand car that saves £100/month, but what value do you give to reliability and convenience?
If you still think it's worthwhile I'd look something like a diesel Accord.
It isn’t 250 a month though...you lose the hundreds in your hand (cash allowance) that you surrender by opting in to the cc scheme. You may find an old second-hand car that saves £100/month, but what value do you give to reliability and convenience?
If you still think it's worthwhile I'd look something like a diesel Accord.
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