To Company Car or not to Company Car

[Casdawer]

Hello,

My current workplace offers a company car or cash alternative scheme and since starting 14 months ago I've taken the cash (£5080pa / £423pm GROSS)

My current car is nearing the end of its lease agreement so I'm weighing up the costs differences between the two.

My base salary is £43,350.

I've been looking at some of the cars that I can get from work and some of them offer the trade down.

Example is VW Polo 1.0 SE (£16,210.00 / 104 g/km) with a trade down of £ -124.05.

I'm a bit lost on what the actual NET changes are to my monthly wage by opting for the company car instead of the cash allowance.

Can someone who's had experience on this break this down for me?

Thank you!

 

[HangTime]

I think there may be some loophole introduced recently whereby if you have the choice of cash or company car, taking a car with low BIK may not actually save you any tax as they can tax you based on the cash allowance if it is higher, regardless of whether you took it or not. Just something to research / keep in mind.

 

[IAmATeaf]

I think there may be some loophole introduced recently whereby if you have the choice of cash or company car, taking a car with low BIK may not actually save you any tax as they can tax you based on the cash allowance if it is higher, regardless of whether you took it or not. Just something to research / keep in mind.

A work colleague has been made aware of this recently. His company car, a Polo GTi is up fro renewal, so to save some money he specced up the lowest of the lowest spec Up and that came in at more than he was paying got the Polo, he queried and was told the above, so he's now decided to opt out.

 

[blueboy2001]

Where the car's CO2 emissions are over 75g/km the driver is taxed on whichever is the higher amount of the car benefit or the sacrificed remuneration (the cash alternative).

As a rule of thumb, taking a car is only worth considering if you do big mileage (20K+) or your circumstances make it difficult to source your own finance to get a decent car or your insurance is unusually expensive etc.

Go on comcar.co.uk to get an accurate tax calculation.

If you take that Polo, I think you'd be taxed on the cash allowance anyway, but the trade down will effectively give you a £1488.60 salary increase, but would be taxed at 40% so you'd see about £890 - there may be some NI to come off that as well though. If you don't earn anything other than your basic+car allowance, you would pay £1400 tax this year but you've get £890 back so £610 net tax.

However, you would be forsaking about £3k net cash allowance to take the Polo, so it's costing you £3600 a year. That seems a lot for a 1.0 Polo.

 

[Howard]

My girlfriend didn't have the option of a cash allowance; it was a company car or nothing. In her case, the £70-odd BIK tax per month to have a car (mid-spec Seat Leon, so nothing horrible) to use was a no-brainer. In this case however, I think I'd take the money.

 

[Tinders]

If you dont do many miles, private or business, then opt out. Its not worth the tax hit.