£6300 car allowance.......what are me options?

[DrYazz]

Dear PH folk,

have never had a company car, so have never read up on the rules pertaining therein.
If I was offered a '£6300 car allowance', what does that mean and what are my options?

What would you do or advise?

[Defcon5]

I beleive it means you have £525 before tax per month to get a car

[ian_c_uk]

I assume that's £525 per month before tax, so £315 in your pocket after 40% tax.

Let's assume £600 insurance, £250 for a set of tyres, £150 for a service, £200 road tax.

You would then be left with £215 to obtain the vehicle. That's a £7k car on HP that you will own in 3 years, or 7k depreciation (PCP) on something more expensive, or take a look at lease costs?

It all depends what cars they are offering as an alternative to the allowance.

[edo]

Ian has summed it up well. To clarify, a car allowance is not a company car.

[DrYazz]

edo said:

Ian has summed it up well. To clarify, a car allowance is not a company car.

What is the difference and which is the better option? I really do not know the pros and cons either way.

[edo]

DrYazz said:

edo said:

Ian has summed it up well. To clarify, a car allowance is not a company car.

What is the difference and which is the better option? I really do not know the pros and cons either way.

Are they offering you a company car instead, or is it just the allowance?

Let me show you my option and how it works for me - it varies by company (except the tax part).

I, like you can have the cash "car allowance" which is taxed like the rest of your salary at your top rate - 40% for me, and if you earn over about £30k, it would be for you. If not, then 20%. You can do what you want with that money - but some companies stipulate the type and age of car you drive - eg for me it has to be under 5 years old, have rear doors etc...

The other option for me is a company car lease. (via leasplan in my case). I have a monthly lease allowance, and spec the car as I want from the lease system. I can spend more (and pay extra), or less and take the cash difference back (within limits).

Then, based on car value and C02 level, I pay an annual tax to the tax man, and I also pay tax on a fuel card that I get.

There are pros and cons to each.

Taking the money:
Do what you want
Chop and change
buy used (potentially getting you into "better" cars
you have risk of bills, tyres, repairs, have to pay your own tax, insurance, depreciation
lose your job and you still have the car

taking the car:
fixed costs
no surprises
new car
no depreciation, tax, insurance, surprises
lose your job, or leave and you hand the car back
tax bill on top of not getting the allowance

[DrYazz]

Thanks Edo. Some points have been clarified, certainly.

Can I have some examples (taking tax into consideration) of what £6300 will get you?

I presume a Bentley Continental GT is out of the question.

[edo]

DrYazz said:

Thanks Edo. Some points have been clarified, certainly.

Can I have some examples (taking tax into consideration) of what £6300 will get you?

I presume a Bentley Continental GT is out of the question.

Just to be clear, £6,300 is just extra salary, so assuming you pay 40% tax, you will be left with £315 a month extra in your pocket.

You can get a loan to that much, the longer the term, the higher the amount, and buy a new or used car with it.

Or you can lease a car, £315pm will get you a low end golf for example (see www.lingcars.com to get an idea of personal lease costs).

You have to insure, service, tyre and run on top of the lease costs.

[Mattt]

People are forgetting AMAPs, mileage payments, which an element of also pays for running costs.

[cronk-flakes]

edo said:

see www.lingcars.com

Holy fk! My eyes!!!!

[edo]

Mattt said:

People are forgetting AMAPs, mileage payments, which an element of also pays for running costs.

True - you can claim mileage allowance on a private car (bought or leased with allowance cash) for BUSINESS miles.

[DrYazz]

cronk-flakes said:

edo said:

see www.lingcars.com

Holy fk! My eyes!!!!

Yes, it certainly is a BUSY website.

[Matt UK]

At what rate can you claim your business miles?

It could make a huge difference to how far your allowance will stretch.

[V88Dicky]

The good lady wife gets a similar car allowance, with caveats like; must be under six year old etc etc.

Back in June this year, she plumpted for a three year old S-type V8, and traded in her 8 year old Passat for it.

Nothing like the type of car I expected her to go for, but she really likes it!

TBH, so do I!

[Blown2CV]

just means you get an extra 6300 quid on your wage before tax

i am sure you would not be compelled to buy a new car with it, but the company may 'encourage' you not to drive a old, cheap looking or general stheap of a car. That said I get 6k PA and my car is worth about 1500, and is by no means the sttest in the allowance-earning car park.

[edo]

HMRC publish set rates for payments to employees ( and director's of Limited Companies) to reimburse the cost of the employee using their own vehicle for business related travel.

For the travel to be business related then the travel should be to a temporary workplace, please see our detailed guidance on the definition of a temporary workplace and the 24 month rule.

The legislation, Sections 229 to 236 ITEPA 2003, defines both "MAP" , Mileage Allowance Payments and "AMAP", the Approved Mileage Allowance Payments.

MAP - Mileage Allowance Payments

HMRC issue detailed guidance explaining what an MAP is at EIM3210 , but briefly a MAP is a payment to cover the costs of travel in a vehicle on a business journey.

AMAP - Approved Mileage Allowance Payments

The HMRC detailed guidance on AMAP's is at EIM31230 which explains that the legislation gives a statutory exemption to tax for AMAP's under two conditions:-

The payment is a MAP
The amount of the payment is within the rates set out for the tax year in which the journey is made for that type of vehicle.
The amount is also defined as "Miles" X "Rate" . Where Miles is the number of miles travelled by an employee who is not a passenger, and Rate is the rate applicable to the vehicle.

Payments made using the AMAP Scheme do not have to be declared on a P11D.

Rates

The rates given are the maximum that can be paid free of tax. Any payments above the Approved rates are taxable, and an employer can pay less if they so wish.

Car or van first 10,000 40p after that 25p

[edo]

anonymous said:

[redacted]

it is legit. If you look properly you will see that whilst "different", everything is there, and some of lings pricing is pretty competitive (certainly my local bmw dealer couldn't get close to her lease prices).

[American iv]

anonymous said:

[redacted]

it's legit.

The lady in question was on Dragons Den and the site itself is meant to be very succesful. How I don't know, but there you have it. It's amusing to see her rants against her own customers though

[Matt UK]

anonymous said:

[redacted]

Ling will find this comment.
When she does, run my friend, run.

[guy10]

Hi

I have something similar...

Another way of looking at this, particularly if you've never had a company car before, and have always paid your tax, insurance, tyres etc is that you've got about £3800 (your car allowance after 40% tax) worth of "free" depreciation.

If you're a petrolhead, which I assume you are because you're posting here, this is fantastic news...Go and buy a 3-5 year old fantastic car and keep it for 3 years

A random example http://www.pistonheads.co.uk/sales/1877105.htm

do 25k miles a year, sell it after 3 years

http://www.pistonheads.co.uk/sales/1892899.htm

If you need a loan to buy it then you have to take the interest into account as well. Yes, yes....All the bills will be more than before...but you'll have a great time

Guy