Company Car Allowance

Scrutinize

Scrutinize

Scrutinize

Soldato
Joined
4 Apr 2003
Posts
8,053
I have got a new job much closer to home reducing my 124 mile daily commute by over half.

Upsides,

1) It’s just down the motorway from me.

Downsides

2) It’s not accessible by train / bus so I have to drive.


In light of this, I have been given the option of a company car or car allowance. :D The final amount or car is to be agreed once I start, so I am still in the dark on the amount. :(

However, I get the choice of a fully expensed, maintained, insured company car or the equivalent in monthly car allowance. Or even a lesser car with a part allowance / cash top up. Anyone know how the tax works on car allowances and if it just get lumped onto salary and ends up as Payee wrt tax/ni?


  • Now as for the company car, I know that I would have to pay company car tax so this would cause my salary to go down by what ever that is per month.
  • In terms of allowance, I am guessing it would be a few hundred so I could purchase / lease hire something with this of my choosing.
  • Alternatively, I could keep my Astra, pocket the allowance and not pay company car tax but then as I have to use the car for business could put quite a lot of mileage on it. Equally if anything major breaks, I would have to fork out.
  • It’s difficult without knowing amounts but over the year, I am guessing pocketing the allowance would be the financially beneficial option unless the Astra went badly wrong.


So any thoughts, or useful insights? Would be appreciated…..:cool:
 
Google will tell you exactly how the tax system works. In my experience taking the cash alternative is a no-brainer. But then I don't really do any business miles except a few trips to the airport and my allowance is enough for a new 320d yet I choose to drive a 4 year old Fabia VRS and pocket the difference!
 
clv101 said:
Google will tell you exactly how the tax system works. In my experience taking the cash alternative is a no-brainer. But then I don't really do any business miles except a few trips to the airport and my allowance is enough for a new 320d yet I choose to drive a 4 year old Fabia VRS and pocket the difference!
Click to expand...

Did you have any limits on the age / type of car you could choose when you got the VRS? Is it on lease hire / finance?
 
The company car has to be brand new, provided through the leasing company, kept for 4 years, they arrange insurance, tax, servicing, tyres etc... I just chose to take the cash alternative instead. I'm now responsible for everything, so bought, taxed, insured etc privately. The only "requirement" from the company is that I do have a car and it has to have at least 4 seats.
 
For me its a no brainer, the tax disadvantage and the loss of the allowance far outweighs the car i was being given.
 
I was in the same position when I started my job, I opted for the car allowance on the basis that i'll actually own something for the tax I pay. If I'd had a company car - sure they pay for the insurance/servicing/etc, but ultimatley at the end of your employment you have to give it back so you've paid tax for nothing.

I took out a car loan and the monthly payments match the allowance I get so it pays for itself.
 
So the cash alternative is usually the better option?

Interesting to hear about others experience with this, as I'm up for a promotion and change in role soon and will be getting a company car - usually a Vauxhall Vectra 1.9 Design.

Scort.
 
Yes take the cash, unless you do mega miles travelling to and from work the cash option is in most cases the best bet. You need to do the numbers for yourself and it is worth talking to others in the company to see what they have done. We used to have loads of people on the company car scheme now only the ones that do a 70+ mile round trip a day seem to stay with the company car because tyres, servicing and depreciation are all taken care of.
 
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Personally I went for the company car, but then my allowance is rubbish & I got to choose a fairly good car.

I do a lot of business miles though & that with the piece of mind of zero bills, maintenance, park & leave it where I like etc is worth the tax hit each month to me.

Many variables & will vary from person to person really, allowance amount, car choice etc.
 
Company car can make financial sense in some circumstances (though mainly for a director/shareholder)

1. High personal insurance premium.
2. Poor credit risk.
3. High private mileage (e.g. long commute) with all fuel paid by company.
4. Classic car.
5. Very expensive car.
 
not meaning to jack but how can insurnace comapnies prove it's business use and not personal.

my office is in bradford but i dont work there i work on sites around the country which is my place of work, so surley thats just commuting to and from work?
 
Allowance is an excellent idea and means you can buy a good car rather than have your company ruin your interest in cars by providing you with a crappy Golf or Passat diesel thus removing any justification you had for owning your own car :p
 
DannyW said:
not meaning to jack but how can insurnace comapnies prove it's business use and not personal.

my office is in bradford but i dont work there i work on sites around the country which is my place of work, so surley thats just commuting to and from work?
Click to expand...

I don't think you can get away with that to be honest - and in this day and age do you really want to run the risk of rejected claim, points on license for invalid insurance etc. I paid extra when I took my policy out to cover me for business use - I don't go out on site very often but wanted to make sure I was covered.
 
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