New to company cars - out of my depth!
Discussion
Hello all,
I'm looking for a little help from the more seasoned professionals that have/or have had a company car. This is my first experience with being provided a company car, so there's a lot of options confusing me.
I'm being provided with a new Audi A3 S-line. All maintenance etc paid for by the company. It's the fuel card/private mileage side of things that is confusing me. The alternative allowance is pretty low after tax, so the company car does look like the best option. But, you can only be reimbursed for business travel at the fuel only rate (45p per mile for 10k then 25p per mile after this) if you take the cash for car route.
I can opt for a fuel card, or for an alternative of £1000 in cash per year (subject to tax and NI deductions) - which doesn't seem too great. My business mileage is projected to be 20,000 per year and private mileage around 6,000; so does the fuel card seems to be the best option? I assume I pay tax on the fuel card as I have private mileage too?
Apologies as I know this topic will be done to death, but it's going right over my head.
I'm looking for a little help from the more seasoned professionals that have/or have had a company car. This is my first experience with being provided a company car, so there's a lot of options confusing me.
I'm being provided with a new Audi A3 S-line. All maintenance etc paid for by the company. It's the fuel card/private mileage side of things that is confusing me. The alternative allowance is pretty low after tax, so the company car does look like the best option. But, you can only be reimbursed for business travel at the fuel only rate (45p per mile for 10k then 25p per mile after this) if you take the cash for car route.
I can opt for a fuel card, or for an alternative of £1000 in cash per year (subject to tax and NI deductions) - which doesn't seem too great. My business mileage is projected to be 20,000 per year and private mileage around 6,000; so does the fuel card seems to be the best option? I assume I pay tax on the fuel card as I have private mileage too?
Apologies as I know this topic will be done to death, but it's going right over my head.
If you are only doing 6K private miles a year in a fuel efficient car like the Audi A3, the fuel card is a terrible option. The firm should be reimbursing your business mileage at HMRC recommended rates for your car. What engine size is it and is it petrol of diesel. For example, you should be getting 9p a mile if it's a 1.6D or 14p a mile if it's a 1.6 petrol. All the set rates are on the HMRC website.
Jonno02 said:
Hello all,
I'm looking for a little help from the more seasoned professionals that have/or have had a company car. This is my first experience with being provided a company car, so there's a lot of options confusing me.
I'm being provided with a new Audi A3 S-line. All maintenance etc paid for by the company. It's the fuel card/private mileage side of things that is confusing me. The alternative allowance is pretty low after tax, so the company car does look like the best option. But, you can only be reimbursed for business travel at the fuel only rate (45p per mile for 10k then 25p per mile after this) if you take the cash for car route.
I can opt for a fuel card, or for an alternative of £1000 in cash per year (subject to tax and NI deductions) - which doesn't seem too great. My business mileage is projected to be 20,000 per year and private mileage around 6,000; so does the fuel card seems to be the best option? I assume I pay tax on the fuel card as I have private mileage too?
Apologies as I know this topic will be done to death, but it's going right over my head.
Get on ComCar (https://comcar.co.uk/) and crunch the numbers. Toggle the "With private fuel benefit" box on/off to see its effect. I suspect at only 6K private miles you will be better off not taking the fuel card. A fuel card is convenient as you don't need to keep mileage records or reclaim the cost of your fuel but is it worth paying more tax? Or take the card but not the private fuel benefit.I'm looking for a little help from the more seasoned professionals that have/or have had a company car. This is my first experience with being provided a company car, so there's a lot of options confusing me.
I'm being provided with a new Audi A3 S-line. All maintenance etc paid for by the company. It's the fuel card/private mileage side of things that is confusing me. The alternative allowance is pretty low after tax, so the company car does look like the best option. But, you can only be reimbursed for business travel at the fuel only rate (45p per mile for 10k then 25p per mile after this) if you take the cash for car route.
I can opt for a fuel card, or for an alternative of £1000 in cash per year (subject to tax and NI deductions) - which doesn't seem too great. My business mileage is projected to be 20,000 per year and private mileage around 6,000; so does the fuel card seems to be the best option? I assume I pay tax on the fuel card as I have private mileage too?
Apologies as I know this topic will be done to death, but it's going right over my head.
I don't know your salary, but be aware that the BIK (fuel) may be enough to push you into the 40% tax band.
Also, look at the BIK tax rates for next tax year and be aware that they go up every year. A company car and fuel card gets more expensive every year.
Edited by toddler on Thursday 3rd May 13:38
Edited by toddler on Thursday 3rd May 13:59
Also if they insist on a flat payment per year of £1000 for all your business mileage, at the end of the tax year work out, based on your business miles, how much per mile that is. So if you do 20K business miles, that's just 5p a mile. Then see on the HMRC guide what you should have got, say 14p a mile, and you can claim the tax back on the 9p/mile difference. 20K x 9p = £1800, so £360 refund as a 20% tax payer, £720 if 40%.
Dont underestimate the .45p a mile for business miles, for 20k business thats £7k a year tax free on top of the cash alternative allowance. In something fuel efficient that does say 40-45mpg , thats about £3500 of fuel inc your private fuel, so you have £3500 tax free towards running costs...thats a lot of running costs or additional money to put towards the car.
Ive had company car entitlement for 20 years now and never managed to make the company car pay. You are always paying depreciation on a new car whichever way its funded and tax has become more of a burden over the years.
On busy years I did 30k miles, 25K business. I just used the cash alternative to pay personal loans, put some cash towards cars I wanted and bought older cars to run for a few years. Started with old Peugeot and Volvos, had a few Audis inc an S4 and RS6. Just built up equity along the way in my commuter car using the allowance and fuel to run them. 5 yrs ago I spent £30k cash on a 4 yr old Range Rover sport with 30k miles on it, still got it now at 9 yrs old with 110k miles on it. All funded by car allowance and fuel benefits from employer.
My other half does the same, shes had a few Volvos, buy say a 5 yr old S60D5 with 50k miles for £6.5k cash, buy it with cash or small personal loan , run it until 10 years old, sell it for £1500-2000 at the end and start again. Youve lost £3k and a few grand running costs, yet over 5 years received say £20-30k in allowances/fuel from employer and you still own the car (whatever value it is)
If you like owning new cars every 3 years and are willing to pay for that privilege then sure, go for a nice new company car...but do the maths first on the true costs. The comcar website is really useful. Usually you can buy a 3-4 year old car for cash, for what you pay in depreciation or company car tax over the first few years of its life. The difference is in one instance you still own the car, albeit older, compared to renting the use of a new car for 3 years and giving it back........
Ive had company car entitlement for 20 years now and never managed to make the company car pay. You are always paying depreciation on a new car whichever way its funded and tax has become more of a burden over the years.
On busy years I did 30k miles, 25K business. I just used the cash alternative to pay personal loans, put some cash towards cars I wanted and bought older cars to run for a few years. Started with old Peugeot and Volvos, had a few Audis inc an S4 and RS6. Just built up equity along the way in my commuter car using the allowance and fuel to run them. 5 yrs ago I spent £30k cash on a 4 yr old Range Rover sport with 30k miles on it, still got it now at 9 yrs old with 110k miles on it. All funded by car allowance and fuel benefits from employer.
My other half does the same, shes had a few Volvos, buy say a 5 yr old S60D5 with 50k miles for £6.5k cash, buy it with cash or small personal loan , run it until 10 years old, sell it for £1500-2000 at the end and start again. Youve lost £3k and a few grand running costs, yet over 5 years received say £20-30k in allowances/fuel from employer and you still own the car (whatever value it is)
If you like owning new cars every 3 years and are willing to pay for that privilege then sure, go for a nice new company car...but do the maths first on the true costs. The comcar website is really useful. Usually you can buy a 3-4 year old car for cash, for what you pay in depreciation or company car tax over the first few years of its life. The difference is in one instance you still own the car, albeit older, compared to renting the use of a new car for 3 years and giving it back........
Edited by bogie on Thursday 3rd May 15:27
Often the key to the economics of a company car is personal insurance. If this is the OP's first job with a company car, he could be quite young. If his car insurance is going to cost £1500, all that is free with a company car.
The other thing overlooked with a co car is that, good or bad, at least it's fixed. You know exactly what it'll cost you a month, for the next 3 years. That's worth something. You're own car can very hugely. A couple of accidents where you get stuck for the excess, lost ncb and next year's renewal premium, a couple of flat tyres, an unexpected fault, they can all be dealbreakers.
And Audi A3 S Line is a nice car, BIK is very reasonable, especially as a 20% taxpayer, so on 20K business miles a year I'd be taking that all day long.
The other thing overlooked with a co car is that, good or bad, at least it's fixed. You know exactly what it'll cost you a month, for the next 3 years. That's worth something. You're own car can very hugely. A couple of accidents where you get stuck for the excess, lost ncb and next year's renewal premium, a couple of flat tyres, an unexpected fault, they can all be dealbreakers.
And Audi A3 S Line is a nice car, BIK is very reasonable, especially as a 20% taxpayer, so on 20K business miles a year I'd be taking that all day long.
Yeah you are right - early on in your career if your insurance is £1000 plus that makes a big difference, as does having cash savings to put into a car versus borrowing (and cost of that) If you have just got your first mortgage etc then having a fixed monthly payment and "no worries" can be important too, versus the uncertainty of the occasional expensive service bill on a 5 year old car you need for work....
As always you have to do whats right for your circumstances.
I prefer the choice of what car im driving and im happier to drive a 4 yr old (or older) more luxury car than what I want to afford new...most of the time ive been lucky with running costs, occasionally had a crap car thats cost thousands in a 2 year period and got rid of it....that is a real risk when doing 20-30k miles a year in an older car......
As always you have to do whats right for your circumstances.
I prefer the choice of what car im driving and im happier to drive a 4 yr old (or older) more luxury car than what I want to afford new...most of the time ive been lucky with running costs, occasionally had a crap car thats cost thousands in a 2 year period and got rid of it....that is a real risk when doing 20-30k miles a year in an older car......
The above two posters are right - it is difficult to say which way you should go without more information. But with what we have got (ie, 20k business and 6k private) the most likely position is that (1) the co car option is better than private car (unless the cash option is decent and you can bear to buy something already well depreciated and you don’t suffer any big bills from adding big miles, but if you value peace of mind and an easy life a higher expected cost might be worth it) (2) don’t touch a fuel card with a barge pole. Probably only worth it if doing at least 20k private miles (unless the car is a plug in hybrid in which case you would still have to do the maths to see if worth for 6k miles)
Jonno02 said:
But, you can only be reimbursed for business travel at the fuel only rate (45p per mile for 10k then 25p per mile after this) if you take the cash for car route.
That's not the fuel rate - that's the amount to cover fuel and running your own car for work. Most unlikely you'll get that if you also get an allowance.The fuel rates are reviewed regularly - current rates: https://www.gov.uk/government/publications/advisor...
Jonno02 said:
I assume I pay tax on the fuel card as I have private mileage too?
It's possible your company might not be bothered doing all that in which case you get hammered by the full private fuel BIK assessed on the car. That usually works out horribly, especially if you don't do much private mileage.
Gassing Station | Finance | Top of Page | What's New | My Stuff