Anyone care to explain company car and fuel tax?

[Del Lardo]

I've been offered a new job (go me ) and part of the package is either....

1. £475/month company car allowance for leasing (that I would have to spend on a 4 door diesel) or £500 cash and having to run a car of my choosing.

2. A fuel card that I can use for business and private mileage or £100/month plus business trip fuel paid for.


Now pretty much all of my business trips will be to mainland Europe so I will be flying so my plan was to take the £500 and the fuel card.

Couple of questions....

1. Would I be correct in thinking that I will be taxed on the £500 at my normal tax rate?

2. What sort of tax burden am I looking at on a fuel card? Is it calculated on how much fuel I use or is it a fixed cost?


Thanks.


P.S.
I am planning on spending the £500 on a Merc C200K that I am going to tune to 1001bhp

 

[Guv]

1. Would I be correct in thinking that I will be taxed on the £500 at my normal tax rate?

2. What sort of tax burden am I looking at on a fuel card? Is it calculated on how much fuel I use or is it a fixed cost?

1) If you're paid the £500 as part of your salary then it will be taxed at the income tax rates.

2) If you're given free fuel for ONLY business miles, then no tax. If you are given free fuel for business and private fuel then it's calculated depending on the CO2 emissions of your car. The benefit in kind will be £14,400 multiplied by the % worked out using the formula and CO2 emissions. You are then taxed on the benefit in kind at the income tax rates. If you let me know the CO2 emissions I'll calculate the benefit in kind and tax for you.

(edited answer 2)

 

[Del Lardo]

CO2 emissions are 168 (g/km) for my Elise.

 

[Guv]

Taxable benefit (benefit in kind) will be £2,880.
The tax depends which tax band you're in - likely to be either 22% or 40%, so tax will be £634 or £1,152 depending on tax band.

 

[Vertigo]

Well given the package on offer I think it's reasonably safe to assume he's a higher-rate tax payer, in which case the fuel tax works out at roughly £100 per month, same as the cash alternative.

Basically, if you pay a fair bit less than this per month for fuel, take the cash, otherwise take the card

Regards the car itself, yes you'll be paying 40% tax on the £500 but you also need to factor in the absence of company car tax. Given the £475 budget, the kind of car you'd get with that will be costing you at least £200 per month in tax which effectively offsets the income tax so you'd basically have £500 in your pocket each month in place of the company car.

 

[Del Lardo]

Thanks for the info Guv. One last question. If I was to take the £100 instead of the card presumably I would get taxed the normal rate on the £100.

If so then I would need to spend over £160/month on fuel for the card to become cost effective (working on 40% tax band)?

 

[Vertigo]

Thanks for the info Guv. One last question. If I was to take the £100 instead of the card presumably I would get taxed the normal rate on the £100.

Oops, forgot about that, you're right.

If so then I would need to spend over £160/month on fuel for the card to become cost effective (working on 40% tax band)?

Yep, assuming zero business miles, pretty much. Take the cash.

 

[Del Lardo]

mmm, so I could rather well out of this Or I could spank the whole lot on leasing an Alfa Brera, ooh something is stiring in my pants

 

[Vertigo]

mmm, so I could rather well out of this Or I could spank the whole lot on leasing an Alfa Brera, ooh something is stiring in my pants

With which engine though?

Be careful as, on 40% tax, large petrol engines will crucify you on tax.

EDIT: Sorry, just remembered you said the company car would have to be a 4 door diesel, thus you obviously meant spending the allowance on a Brera.

Can think of better things to blow £500 a month on tbh. Instead of buying outright you could always look at personal leasing if you want the peace-of-mind that comes with company cars but without the tax. Nissan 350Z? New Audi TT 3.2?

 

[Del Lardo]

Would have to be the 2.2 and to be honest I can think of better things to spend that sort of money on especially as I wouldn't get much use from the car. Just saw one for the first time the other day and it did funny things to me