Company car allowance, what are the tax benefits/liabilities?

matt100

matt100

matt100

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My brain is starting to ache with this, I need help from either a) and accountant or b) someone who already uses this sort of opt out thing to the maximum benefit.

I have a new job, starting at the end of August. The job I'm leaving came with a company car (astra 1.8 sri urgh, VERY happy to see the back of that) and a fuel card whereby I declare my private mileage and then the total amount I spent on fuel is divided by the total amount of miles to give a pence per mile amount, that is then multiplied by my private mileage and that amount is deducted from my wages and therefore its not a taxable benefit anymore but I do pay company car tax somewhere in the region of £300 a month I reckon (I get -£500 tax free allowance iirc)

But the new deal is I finance my own car based on...

£675 per month before tax if I do 0-20k per year
£850 per month if its 20-40k (most likely)
£1000 per month if its 40k+

I want to budget on the lowest just to be on the safe side and give myself the opportunity to pocket a bit of a sneaky wage rise if I slip into the £850 a month.

I also get a fuel card with private mileage paid for.

Now the guy at BMW today went mental scribbling figures on a piece of paper and somehow arrived at the conclusion I have effectively £900 a month give or take based on me doing roughly 30k miles per year, 3k of which would be personal which sounds about right as the trips to the office would be business mileage because I wouldn't go there more than twice a week so every work related trip away from my house would be classed as business mileage.

That was calculated on the £675, less 40% tax, removal of my company car tax and then (and this was the bit I really don't get) claiming back loads of money from the inland revenue against my business mileage?

Can anyone explain that part? I remember him scribbling down 12p this and 10p that and then taking that against my fuel card tax etc etc etc. And ultimately he wound up telling me the £20k 320ci I was looking at might be "a bit conservative for your budget".

Was he talking nonsense? HELP!
 
Im quite interested in this too as the missus has recently had a promotion and is now elegible for a company £5.5k car allowance.

With the allowance less 40% tax, can you just wander into a dealership and pick a car within budget and just give them the allowance less tax. Do you have to put down a deposit or is there a no deposit option. Probably pretty stupid questions but never having done this sort of thing, Im totally ignorant of it all.
 
matt100 said:
That was calculated on the £675, less 40% tax, removal of my company car tax and then (and this was the bit I really don't get) claiming back loads of money from the inland revenue against my business mileage?

Can anyone explain that part? I remember him scribbling down 12p this and 10p that and then taking that against my fuel card tax etc etc etc. And ultimately he wound up telling me the £20k 320ci I was looking at might be "a bit conservative for your budget".

Was he talking nonsense? HELP!
Click to expand...

From what I can gather, if you purchase a personal car using your allowance and get money back for fuel, if what you get isnt enough to put you through a certain amount the Inland Revenue sets for certain miles, you can claim back the difference. I didnt think it applied to people that have fuel cards though.

edit: Found this on google. The scheme is called - Approved Mileage Allowance Payment (AMAP).

If you are paid less than the AMAP rate you can get tax relief against your earnings for the difference. This relief is called Mileage Allowance Relief or MAR. To make a claim you will need to keep a record of your business miles and the mileage allowance payments made to you by your employer.

First 10,000 business miles in the year Cars & Vans 40p
Each mile over 10,000 miles in the tax year Cars & Vans 25p

All found here
 
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Well the chap from bmw explained it (reasonably well) that the fuel card is seen as a taxable benefit because they assume I'll be raking it in (much like my father in law who works in an office every day and is therefore commuting paid for by his employer.. hence benefit). What I am doing is my job which involves business travel so its not really a benefit, I just have to prove to the inland revenue it isn't a benefit and that starts to make me some cash.

I just did a calculation on www.lvl.co.uk which seemed to tie in pretty closely with what the guy from BMW was saying, pretty much £900 a month and thats not including the reduction in my company car tax.

Now then, the other attributing factor is that I would with my normal wages be just under the 40% tax bracket but with the car allowance its going to make it look like I'm being paid somewhere in the region of £40k a year so quite comfortably in the higher rate which strangely enough seems to play in my favour here because I can claim more tax back.

This is all very confusing and just goes to strengthen my believe that I have finally, at the ripe old age of 29, got a proper job :)
 
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