Company car allowance

inkey$

inkey$

Lifer
 Sevenoaks & Suffolk
I've been offered company car allowance at work and being as I've never had this before, have no need for a company car and already have a car I have two options on what to do with it.

1/ Bank it and enjoy - this will be taxed as additional salary Im assuming, not as a P11D benefit?

2/ Buy a second car the gf can drive - wont drive the ///M.

Am sure people on here have probably experienced a similar scenario so be interested to hear your thoughts.
 
I left our company car scheme to get my Z and took the money instead - an allowance it will be subtracted from the tax free portion of your salary like the value of any other benefit to calculate your tax code.

As for what to do with it... How many brownie points have you left after Operation Cotton Wool ? :lol:

How about save half, enjoy the other half and decide when you have a few grand... Perhaps she'd prefer a really nice holiday. Does she actually need a car in London ?
 
I do like your thinking Bing.

And after Operation Cotton Wool has now fully swung into action, the brownie points are seriously depleted so doing something special may be the way forward (for her not for me of course). Car for shopping, tip runs, MTB transport would be useful but not massively essential.
 
if you have been offered a car allowance have they also offered you money for petrol?
 
If Im not mistaken, car allowances come under the heading of "not actually part of the salary" and therefore do not need to be declared to girlfriends or wives etc.
This means it can go straight into the slush fund to finance important upgrades etc ........

Car for the GF !!! :D :D she must be worth it ........
 
I like teamemmenracing's idea. You could spend the cash on the real love of your life - your ///M :lol:


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Very good points raised gentlemen. Surely she wouldnt notice. Maybe I should test the theory and buy a set of CSLs :D
 
Well as we all know inkey$ the OEM CSL can be picked up for next to nothing!! :P

I've got a CC allowance and it's great - funds the M and the Honda Civic 1.6VTEC I've bought as a daily shed!
 
Just a thought, but do you travel for work...and claim the petrol costs back?
If you get a Company Car allowance, you'll only be able to claim 11p per mile (which is about what it costs to travel a mile), where if you use your own personal car for work mileage, you're probably claiming 45p per mile which takes in the overall costs of running a car, not just the fuel.
 
Financially think u now need to do about 20k to make it pay, but that's not the real reason for company car.

If ur doing lots of miles, a personal car will cost more for insurance (as being used for business use), yr problem if gets damaged or breaks down, 45ppm private milage is the basic cost of a cheap runaround- get anything nice & it's much more and you'll be left with a high miler that will be worth very little.

Most of those I know with co car that do over 14k a year opted just for hassle free motoring, with some adding their own cash for extras / model upgrade
 
JonZ4G said:
Just a thought, but do you travel for work...and claim the petrol costs back?
If you get a Company Car allowance, you'll only be able to claim 11p per mile (which is about what it costs to travel a mile), where if you use your own personal car for work mileage, you're probably claiming 45p per mile which takes in the overall costs of running a car, not just the fuel.
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Its a good point. My wife gets 20p a mile (11p is usury, where the hell do you work?!) with car allowance (instead of the more common 40-45p/mile for private car use), and yes, car allowance treated as normal salary for PAYE deductions so it WILL appear on your payslip. Whatever you buy won't be a company car in the strictest tax sense , and they may implement certain conditions if its something they monitor (some companies for example will only allow 4-door saloons to facilitate business use), but for many employers its just an additional slush fund payment that avoids the (more expensive, to them) company car discussion.

So it comes down to the amount of business mileage you do. If you don't do much, just take the money. If you do a lot, work the sums for private versus car allowance mileage rates first. Check carefully whats available, its common for the revenue to insist that, for example, first 2500 miles pa are at, say, 45p, next 8,500 at, say 25p, and back to around40p above 10k miles.

One final point; it depends on how rabid your insurer would be in the event of a claim, but you may need to upgrade your insurance to business use?
 
I like teamemmenracing's idea.

As Taz says - do you get petrol with the car? A friend has a 5er as his company car and the company pays for the fuel in it on a fuel card. He's meant to declare any personal motoring in the car and some how pay that back (or receive a deduction accordingly I guess?). In reality it's very difficult to tell what's business and what's personal mileage ;) I don't know the fine details of how that works but it I know it works massively in his favour compared to taking the cash allowance.
There's also the benefit that insurance, servicing etc is all taken care of.
 
lacroupade said:
Its a good point. My wife gets 20p a mile (11p is usury, where the hell do you work?!) with car allowance (instead of the more common 40-45p/mile for private car use), and yes, car allowance treated as normal salary for PAYE deductions so it WILL appear on your payslip.
It's common for the revenue to insist that, for example, first 2500 miles pa are at, say, 45p, next 8,500 at, say 25p, and back to around40p above 10k miles.
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I'm taking the cash option (as is the mrs) and I reckon we're not far off running 2 Zeds and an e61 for the same money - OK they weren't all new when we got them, but the spec's better than anything on the list - and depends on the amount of the opt out obviously.

lacroupade's not quite right. HMRC only allow companies to pay certain amounts for milage, otherwise the excess becomes a taxable income itself. It ramges from 10p ish to 26p ish from memory (full link here : http://www.hmrc.gov.uk/cars/advisory_fuel_current.htm) for company cars, and 45p for non (upto 10k miles pa).

If you've got a private car then you can claim 45p a mile (for the first 10k) if you're not reimbursed, and if you are you can claim back the difference as an expense which will save you tax too (I've actually been doing this for a few years so they've added it to my PAYE coding).

If i'm beginning to sound like an accountant then....
 
Guiseley said:
lacroupade said:
Its a good point. My wife gets 20p a mile (11p is usury, where the hell do you work?!) with car allowance (instead of the more common 40-45p/mile for private car use), and yes, car allowance treated as normal salary for PAYE deductions so it WILL appear on your payslip.
It's common for the revenue to insist that, for example, first 2500 miles pa are at, say, 45p, next 8,500 at, say 25p, and back to around40p above 10k miles.
Click to expand...

I'm taking the cash option (as is the mrs) and I reckon we're not far off running 2 Zeds and an e61 for the same money - OK they weren't all new when we got them, but the spec's better than anything on the list - and depends on the amount of the opt out obviously.

lacroupade's not quite right. HMRC only allow companies to pay certain amounts for milage, otherwise the excess becomes a taxable income itself. It ramges from 10p ish to 26p ish from memory (full link here : http://www.hmrc.gov.uk/cars/advisory_fuel_current.htm) for company cars, and 45p for non (upto 10k miles pa).

If you've got a private car then you can claim 45p a mile (for the first 10k) if you're not reimbursed, and if you are you can claim back the difference as an expense which will save you tax too (I've actually been doing this for a few years so they've added it to my PAYE coding).

If i'm beginning to sound like an accountant then....
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LOL yes you do!

I am aware of the revenue cap, but all the amounts I mentioned are within limits. The figures I gave for fuel reimbursement against a car allowance (or company car without fuel card) - i.e. 45p >2500 miles, 25p 2500-10,000 miles and 40p >10,000 miles - were in fact fully kosher and were what I claimed during several years of employment with HP and before that Dell. I believe they too are capped around that sort of level by the Revenue.

But 10p a mile would require you to be owning a car that returned in excess of 63mpg just to cover the cost of fuel..........some employers just don't get it.
 
I feel it really depends on your scheme; so without knowing the exact details it can be difficult, but I will share my experience. We have an excellent scheme which makes the car the better option over the allowance. Our scheme works on a personal lease; I think the cash option is around 3600 pa.

Now depending on your tax bracket let’s say you’re at 40% this will in real terms reduce to £2160 pa or 180 pcm (are scheme would not reduce your personal allowance, but taxable benefit). Now my car cost me in real terms after tax deductions ect 42 pcm. I get a brand new car , fully service, insured and anything I need replaced (ps have done 26000 miles in the last 12 months).

There is no way I could run a car for this tax mot ,insurance also serving would be well in excess of 200 pcm I believe. Say 700 insurance 260 tax serving / depreciation would account for 1k I believe and I have place no capital investment into this, 42 x 36 = £1512 is what it will cost me to run the car for 3 years. Also as its personal lease I can pick any car and specification I require . I do only get 12p a mile but as long as I achieve around 50 mpgs which I do it does not cost me anything.

So in summary, if you’re going to use it a lot it pays , if you have little use for a company car better to take cash option.
Of course this IMO not necessary correct or true in other schemes, but I hope it helps a little :)
 
One minor point to add in is that company cars are by definition fully indexed. You have a 1.6 Focus one year and 2 years later you get another, largely regardless of true cost of the car, depreciation, tax,servicing.

If you get say £500 a month try going back in 2 years and saying you now want £600 as that what it costs for an equivelant car.

Personally I came out of car schemes int he late 90's after their heyday and as I now run my own business it's not relevant so can't add furhter to your discussion.
 
cj_eds said:
I like teamemmenracing's idea.

As Taz says - do you get petrol with the car? A friend has a 5er as his company car and the company pays for the fuel in it on a fuel card. He's meant to declare any personal motoring in the car and some how pay that back (or receive a deduction accordingly I guess?). In reality it's very difficult to tell what's business and what's personal mileage ;) I don't know the fine details of how that works but it I know it works massively in his favour compared to taking the cash allowance.
There's also the benefit that insurance, servicing etc is all taken care of.
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You have to do an awful lot of private miles to make a company fuel card worthwhile unless, as stated above, the private element is reimbursed to the company which may not be as beneficial as just having business mileage reimbursed to you at a company rate. If the above is working massively in his favour on the fuel then he's 'on the fiddle' and Lord help him if HMRC find out - they can, IIRC, immediately claim back unpaid BIK tax for the previous 6 years just as a starter.
 
I left our car scheme because I was fed up getting taxed twice - once on the benefit in kind allowance (imaginary money that the company used to fund my vehicle - taxed on money I never saw) and then again for the emissions vs a percentage of the list price - and the tax increased over time on the latter. Had a negative tax code for about 10 years :roll:
 
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