Company car vs Cash. which one would work out best?

fRostiE

fRostiE

fRostiE

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Just had an email from a friend who has asked me for my opinion on the following:

Hey Matt,

Wondering if you can help me with this:

I currently work in IT, full time employment.
I earn £23,000 a year, falling in to the 20% tax bracket.

I have a £22,000 58 plate ford Mondeo at the moment, which I know I pay tax on, how much however I'm really not sure and I've never found out. People have told me it's around the £600 mark.

I'm looking at 'jumping' out of this and using my car allowance which is £325 per month before tax (if indeed i do get taxed on this?).

I'm looking at buying a £3,500 Volvo T5 to knock about in for a few years.

Cost of car £3,500.
MOT each year £40 assuming nothing breaks.
Tax £190
Insurance £1,100 (thats right! a lot i know, I'm 25 with two accidents using 2 years NCB)
Service costs £300 a year.
Parts breaking say£500.

Total per year then, £5630 for the first year. Assuming I run the car over two years, £3880, with the car still being worth £1500, or so.

My payments for the car cash option is £325 per month. So - 20% tax (I assume this is the case) this comes to £260. X 12 months this is 3120 per year cash.

My company have advised that i must use a car fuel card with my car, which is fine. But I've read somewhere that I can claim 40p per mile for the first 10,000 miles and 25p there after when using a company car.

One question: Can this be done with a car fuel card?

I expect to do 30,000 a year, 25,000 business miles and 5,000 of my own miles.

So this is where I get stuck. @25,000 business miles. Does this mean I can claim 40p x 10,000 and 25p x 15,000 per year? = £7750 per year! or not?

Other questions:

Do you get taxed on car allowances? i.e. £320 = £260 after tax (at 20%?

Could someone please tell me how much I pay tax on the company car at the moment please? The list price is £22,000 new.

Also, assuming I 'give up' this £22k Mondeo, I wouldn't pay this tax any more would I and I don't pay tax on my own car would I?

Cheers,
Click to expand...

anyone got any experience with this type of thing or who can provide some insight or advice?

Much appreciated :-)

Matt
 
What an odd email for a mate to send, explaining what he does for a job and how old he is :confused:

Anyway, how can he not know how much he gets taxed, surely it's on his payslip! That's the starting point to be able to compare
 
He won't get mileage money aswell as a fuel card, he will pay for all fuel on fuel card and declare personal mileage.

This is what my last employer did.
 
If the fuel card is fully expensed he'll pay tax on it as well though this is very unlikely. It's more likely all fuel will need to be paid for by him and he'll be reimbursed at 11p a mile.

Most companies spec a minimum age/image of cars to qualify for a car allowance and I doubt a £3500 T5 would fit this. Where I work it's a maximum of 5 years old and minimum of 3 doors.
 
With the fuel car I will assume that is business mileage only

So say the business petrol is 15p a mile

You can claim tax back on 40-15p for first 10k ( as 5p a mile at 20% )

then 25-15p for rest ( 2p a mile at 20% )

as said there will prob be an age limit, 7 yrs where I work

the maintenance costs listed seem well short for that sort of mileage

also allowance is not only subject to tax but also NI

sorry but he really hasn't thought this through at all
 
Company car tax is roughly calculated:

List price * CO2 emissions percentage * tax rate

Personal contributions also make a difference as does the fuel type. Find an online calculator to find out the correct figure.
 
When I had a car allowance the only restriction was that the car had to present a suitable image for the company fortunately this was either very loosley interpreted or nobody noticed my rusting ancient corsa in the car park.
 
Shouldnt be a problem to do, i shall try do it tonight. Will need the Co2 figure though.

Also in terms of fuel

If its the companys fuel card i.e. they pay the fuel then he will pay tax on the benefit of this.

If he has to pay the fuel on his company car, then he can claim 12/13p (IIRC) per mile.

If he pays all the fuel himself he will be able to claim 10k x 40p, rest x 25p.. however if they don't pay him this rate the excess/shortfall can be a tax deductable expenses.
 
How can he not know, it should say so on the wage slip, if not then a quick call to the person who runs the leasing side of things should get some numbers.

If the company provides a fully expensed fuel card then that is a taxable perk too and he won't be able to get any money back from the tax man.
 
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