Company Car Question

Soldato
Joined
18 Oct 2002
Posts
9,383
Just been promoted at work and have the option of taking a £570 monthly car allowance or something from the company car scheme.

Picked out the only decent looking cars from the list:

BMW 320d 2.0d ES 125gpkm
Mercedes C220 2.2 Cdi Blueeff Elegance 127gpkm
Volkswagen Golf 2.0 Tdi 170ps Gtd Dsg6 Mk6 142gpkm
Audi A4 2.0 Tdi 136ps SE 139gpkm
Lexus Is220d 2.2 SE 148gpkm

I generally do about 17.5k miles, 80% personal. No fuel card but I can claim for any business miles.

To be honest, I'm not quite sure how these schemes work with regards to tax.

Say I earn £25k (£1,597 per month NET).

From my understanding, something like the BMW would cost me an additional £79 in tax every month. Obviously I would no longer be paying road tax, maintenance and insurance costs. So take home pay for above example would be £1518?

However, I'm a bit confused with the allowance.

If I go to Listentotaxman and stick the car allowance under 'other allowances', then take home pay is £1711 per month. Or does it for part of Gross pay, therefore is £1991?

Any advice greatly appreciated!:)
 
It forms part of your gross pay. With a £570 per month car allowance you would simply go from a salary of £25,000 to £31,840. You can then choose to have an older car that doesn't cost £473 a month to own!
 
Take the car. The peace of mind is worth thousands. No unexpected bills whatsoever (i.e. tyres, breakdowns, etc.). No fears about huge insurance hikes each year or if you have a minor knock costing you your NCB. Regular new cars every two or three years.
 
It forms part of your gross pay. With a £570 per month car allowance you would simply go from a salary of £25,000 to £31,840. You can then choose to have an older car that doesn't cost £473 a month to own!

I'll just keep my current car going to be honest.

Its only a Skoda Octavia 2.0 Petrol 2006 Reg, but its only done approx 35k miles and never had a problem.

I could just take out an all singing, dancing warranty, breakdown cover for peace of mind and still be better off.
 
Take the car. The peace of mind is worth thousands.
Do you realise that to have a company car for 3 years will cost this guy £17,028?

There are many, many far cheaper ways to get about!

I would suggest taking the money.
I'll just keep my current car going to be honest.

Its only a Skoda Octavia 2.0 Petrol 2006 Reg, but its only done approx 35k miles and never had a problem.

I could just take out an all singing, dancing warranty, breakdown cover for peace of mind and still be better off.
Sensible decision to be honest :)
 
Don't get me wrong, any of those cars would be a fantastic upgrade but it doesn't make financial sense.

Even if I took the car, paid the additional tax and factored out running costs its still no where near the extra income I'd get from the allowance.

I don't cover the mileage to justify it.
 
Do you realise that to have a company car for 3 years will cost this guy £17,028?

There are many, many far cheaper ways to get about!

I would suggest taking the money.Sensible decision to be honest :)

Yes I do realise the cost around £6k a year. But privately running a C220 or iS220d for three years including insurance (with complete NCB immunity), depreciation, etc. would cost far more privately.

As for your statement, "There are many, many far cheaper ways to get about!", it is plainly irrelevant. Buses? Trains?
 
If you are paid a car allowance it is simply treated as additional pay, (at least a few years ago when I had one)

you can be paid (it may have changed a bit now) up to 40p per mile if you are paid more than that you get taxed on it, if less (eg 10p a mile) you then claim 30p a mile back from the tax man (it goes down after 10k miles)

I was getting £500 a month car allowance for 5 years and drove a £1000 clapped out citroen diesel, so it worked out very nice for me...

careful as

1) you usualyl have to take leave for a service if its in working hours
2) if it breaks they can tell you to hire a car at your expence until its fixed
 
Yes I do realise the cost around £6k a year. But privately running a C220 or iS220d for three years including insurance (with complete NCB immunity), depreciation, etc. would cost far more privately.

As for your statement, "There are many, many far cheaper ways to get about!", it is plainly irrelevant. Buses? Trains?
Whether it is a little cheaper to run a C220 through his company car scheme than privately isn't really a significant consideration. He'd probably gain even more of an advantage if he got a company 730d, but that's not exactly a sensible decision, is it?

My comment is not irrelevant. There are far cheaper and more sensible ways to drive about than in a brand spanking new poverty spec compact executive car when you are earning £31k a year. The OP has clearly realised this and has almost immediately discounted the company car option, and is instead going to continue driving his Octavia which will cost him significantly less.

By and large, company cars are rubbish value unless you were going to buy a brand new car of that spec anyway (which most people aren't).
 
In this case, your allowance is so generous that it makes no sense at all to take the car.

That is a very nice package for someone on £25k!
 
In this case, your allowance is so generous that it makes no sense at all to take the car.

That is a very nice package for someone on £25k!

its not that good, remember he has to pay for everythign except fuel... and he will lose 22% of that 500 to tax anway...

we all had 450 a month car allowance and we were only on 22k(ish) base...
 
If you are paid a car allowance it is simply treated as additional pay, (at least a few years ago when I had one)

you can be paid (it may have changed a bit now) up to 40p per mile if you are paid more than that you get taxed on it, if less (eg 10p a mile) you then claim 30p a mile back from the tax man (it goes down after 10k miles)

I was getting £500 a month car allowance for 5 years and drove a £1000 clapped out citroen diesel, so it worked out very nice for me...

careful as

1) you usualyl have to take leave for a service if its in working hours
2) if it breaks they can tell you to hire a car at your expence until its fixed

its not that good, remember he has to pay for everythign except fuel... and he will lose 22% of that 500 to tax anway...

we all had 450 a month car allowance and we were only on 22k(ish) base...

A couple of errors there, basic rate is now 20%, and the bit about claiming the difference back is misleading.

OP, you will be far, far better off taking that (very generous) allowance. Its a total, total no brainer in this case.

Your net position will be the taxed allowance PLUS the saving from the lack of the car BIK. This will add up to a small fortune over 3 years.
 
its not that good, remember he has to pay for everythign except fuel... and he will lose 22% of that 500 to tax anway...

we all had 450 a month car allowance and we were only on 22k(ish) base...

Actually the mileage rate of 40p a mile (or tax relief on the difference if he is paid lower than that) is to cover things over and above the cost of fuel - so his business mileage is essentially paid for.

His £570 allowance will be taxed at 20% not 22% and so will represent a £456 increase in his take home pay or about a 30% rise.

So yes, that is very generous and far better than you paint it!
 
And not only will he be £456 better off, he also wont be paying any company car tax, so his net position is even better off - £550ish NET per month to spend on a car over the company car option.

It's so much of a no-brainer it isnt even funny.
 
Actually the mileage rate of 40p a mile (or tax relief on the difference if he is paid lower than that) is to cover things over and above the cost of fuel - so his business mileage is essentially paid for.

His £570 allowance will be taxed at 20% not 22% and so will represent a £456 increase in his take home pay or about a 30% rise.

So yes, that is very generous and far better than you paint it!

Not quite perfect there, as the car allowance is subject to NI. But then you add the saving in BIK which if we take the OPs figures is an additional £79pm

Works out to around £500 net per month. The cars in the OP are NO WAY worth £500pm to anybody :p
 
Ah yes I forgot about NI contributions and SLC if applicable but even after those we aren't even close to a situation where it is borderline with the cars!
 
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