Opting out of the Company car scheme or not?

wassap

wassap

wassap

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18 Oct 2002
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Hey folks,

i know theres a few tax/financial/Company car guru's here, so i'd like to pick your brains!

Ive always been a company car driver and in the past ive never had the opportunity to opt out, so ive always taken the car and private fuel.

Now with a recent change in role and hike in salary, its puts me in a position where the fuel card is no longer viable as i'd have to pay 40% tax. The car would still be 20%, as that benefit would take up the personal allowance.

So im in a quandry, I can take something like a Jag XF R Sport and pay a small amount of contribution (~£50 + the tax of course) or opt out and get £450 back per month (before tax).

The company stipulates, that if you opt out you have to have a car no more than 3 years old and no more than 60k miles, i'd have to fund my own insurance/tyres/servicing. I do around 20k business miles and 6-7k miles privately. We get a fuel card from work, where i have to reimburse the company for any private fuel i use.

What, if any could i claim back from the govt for my mileage? and realistically is it worth me opting out, as i cant see any 'nice' car thats 3 years old, being particularly cheap, ideally i need a A6/5'er/Ec class size estate. Ive never been particarly good with Tax and what not, so any guidance and advice appreciated.
 
Maybe I am wrong on this, but if your salary now falls into the 40% tax banding, your company car benefit on your P11d would automatically fall into the 40% element?

When I worked in the UK and had a company car I always paid tax on it within the higher earning bracket.

For me it was worthwhile with the mileage that I did every year (close to 35k).
 
Your company car tax is payable in your marginal tax rate so that if you are in the 40% tax band, so is the car.

I personally found it beneficial to move to a lease (PCP) arrangement and take a car allowance. That was some time ago, and I now own my own car and take a car allowance.
 
Mileage for me dictates whether its worth opting out or not, most PCP type schemes are no good for high mileages.
 
Yeah it seems you will pay 40% on whatever is over 42k (if thats the threshold these days) in respect of the company car benefit.
 
Only of the amount over the threshold though. The amount of people I've spoken to who think that you instantly pay 40% on all your earnings is mad... I've actually heard people give advice that you're better off earning less :(
 
There’s a million different factors to consider in order to give an answer. Like salary, specific car, other benefits, whether the company will pay mileage instead etc.

Basically I have no idea without specifics because each individual case has a different answer. I can say this but don’t take it as advice as it may be wrong if I’ve made a wrong assumption and its only by taking a quick glance at your post:

Assuming a Jag, with a list price of £32,300 and Co2 of 104g/km and mpg of 62mpg.

It would cost you £849pa tax on car, plus £1,272 on the private fuel, assuming that the car will use up the basic rate band and the fuel will be in the higher rate band. I have no idea what you mean by personal allowance, I think you have got confused by your coding notice. Plus the £600 (£50 pm payments).

If you reimbursed the company for your private fuel it would only cost you £513 so this would be cheaper but you'd have to keep a detailed record in case HMRC came knocking.

Alternatively you could claim mileage for the business miles from your employer at 10p on a company car (assuming a 2litre diesel) meaning about £2,000 in his pocket, the business fuel would be around £1,475, so this would actually cover most of your private fuel as well. But I don’t know if your company would allow this. If you were to claim for business miles from HMRC you would only get £8,00 tax relief on a company car so you would be out of pocket.

You can’t claim any tax relief on mileage if the company provides a fuel card for business use.

If you were to get the £450 a month you would pay tax and national insurance of £1,728-2,268 depending on whether you fell into the higher rate bracket or not. This would leave you with £3,132-3,672 to cover the costs of your car and then you would be able to claim tax relief of £1,400-£2,800 as a personal car depending on whether higher rate of basic rate based on 20,000 miles. Or you could claim mileage of £7,000 from his employer tax free (again if they would pay out mileage).
 
No worries, i guessed it was something a little more involved. Ive been using the tools on Comcar and i think im getting a better understanding of it all.
 
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