Yet another company car thread...

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Zaf

Zaf

Zaf

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Hi Guys,

It's not very often I dip my toes in the Motors forum but, I'm after some company car advice once again...

I start a new job July 3rd and my current company car will go back (Audi A3 Saloon Sport) and I will be given a £8,400 car allowance with my new role, which works out at £420 a month, what I don't spend I can pocket!

I can claim 45p a mile for the first 10,000 miles tax free and then 25p a mile...

For £420 a month I can get a personal loan from my bank for £22,500 over 5 years with the option to pay it off at anytime (I'm not interested in a lease scheme).

Ideally though I would like to spend around £15,000 (Give or Take) and pocket the rest / overpay the loan, trying to be sensible :rolleyes:

Think I've decided on having an Estate this time round as I do, do a lot of camping / festivals and holidaying in the UK and some wood work in my spare time, so the extra room would be more than beneficial. I am also looking at an 4-wheel-drive as I live near the Peak District and my new job will involve a lot more travelling to Scotland.

Because of the amount of miles I'll be doing a year (30,000 roughly) and getting paid for milage rather than having a fuel card, I want to get something economical too, within reason.

I think I have narrowed in down to the following 3 options;

1. Audi A4 Avant
2013
51,953 miles
Honest John real MPG 42.4
£15,890

2. BMW 320 Touring
2014
60,000 miles
Honest John real MPG 46.5
£14,480

3. Volvo V60 D6
2014
93,000 miles
Honest John real MPG 69.7
£14,479

I know it's the most boring of the bunch and the highest millage but, with the extra MPG the Volvo Hybrid is very tempting!!!

Any help in making my mind up, much appreciated!


EDIT/ I should mention I am only planning on having this car for two years, until either the F-Pace or X4 has depreciated a little more..


Cheers
Zaf
 
you aren't including your tax relief on the mileage over 10k so you have a bit more money

assuming you are 40% tax payer you will have another 8p a mile from 10k up
 
Hi Rotty, you assume right and I didn't realise that. I've always had company cars in the past and paid BIK and given a fuel card, so car allowance is all new to me!

Any thought about my choises?
 
Rotty said:
you aren't including your tax relief on the mileage over 10k so you have a bit more money

assuming you are 40% tax payer you will have another 8p a mile from 10k up
Click to expand...

Can you break this down a little further? I've been arguing with colleagues and consulted lawyers and no one is 100% on the legality of what is claimable.

As I understand, if you get the 45/25p from your employer, then you can only claim the tax back. If you get paid a lesser amount, you claim the difference from HMRC... and the tax on that too? And is the tax rebate only on the mileage over 10k? And why 8p at higher tax rate? That's 32% of 25p.

edit: on topic - if it's just for 2 years and you want to maximise on savings, go for the volvo.
 
My understanding of it is thus:
You can be paid up to 45p/25p per mile (first 10,000/subsequent miles) without HMRC considering it a taxable benefit.
If you claim less than the 45p/25p then you are entitled to tax relief (called mileage allowance relief) on the difference between what you actually received by way of fuel expenses reimbursement and what you're entitled to before it becomes taxable.
HMRC only give you tax relief on the difference, not the difference itself.
If you claim more than 45p/25p per mile then you have to pay income tax on the excess.

This link is for employers but you will get the gist, and it supports what I've said above:
https://www.gov.uk/expenses-and-benefits-business-travel-mileage/rules-for-tax
 
I get that though I still don't see where the 8p is coming into play. And it's still not crystal whether you're asking HMRC for the difference, or just the taxable difference.

e.g. if I get 10p per mile, do I claim 35p/15p back? Or 14/6p? (at 40%)
 
I'm not sure where Rotty's getting the 8p per mile either.

If you claim 10p per mile, then you can claim tax relief on the difference between the 45p per mile (or 25p per mile once >10,000 miles), so as a 40% tax payer you could claim back 14p / mile (or 6p / mile for >10,000 miles). As a 20% tax payer you would be entitled to 7p / mile (or 3p / mile).

It's also not really worked out on a per mile basis as such. You simply enter the amount you have been paid, and what you would be entitled to were you able to claim the full amount, then your tax relief is calculated on the difference. For example on my last tax return I claimed around £4500 for the year, but had I been able to claim for the full amount I would have got around £7000, so I got tax relief on the £2500 difference.

Also, for the following year they make the assumption that you will claim the same amount so they just tack it on to your tax code, effectively giving you the tax relief in advance.
 
Ok I'm starting to get it. You told them you were paid £4500 from your company but should have been paid £7000, and they have now adjusted your tax code by £2500?

...sorry for hijack Zaf
 
D3K said:
Ok I'm starting to get it. You told them you were paid £4500 from your company but should have been paid £7000, and they have now adjusted your tax code by £2500?

...sorry for hijack Zaf
Click to expand...

Not quite. I told them I claimed £4500. Were my company to pay the full 45p/25p I would have claimed £7000. The difference is £2500.

I can claim tax relied on £2500 (£1000 @ 40%, or £500 @ 20%), so my tax code was adjusted by £1000
 
Haha not a problem at all D3K I'm taking this all in myself....

From how I understand it is;

If I get paid 25p per mile by my company, I can claim back the difference between 25p and 45p which is 20p from the government which gets added on to my £11k tax free allowance at the end of the year .... ?
 
Zaf said:
Haha not a problem at all D3K I'm taking this all in myself....

From how I understand it is;

If I get paid 25p per mile by my company, I can claim back the difference between 25p and 45p which is 20p from the government which gets added on to my £11k tax free allowance at the end of the year .... ?
Click to expand...
You can claim the tax component of it, not the full 20p
 
oh hang on I think I have this wrong, the government figure goes down above 10k miles in line with that you get so there wouldn't be a claim

having said that the allowance and fuel rates you are getting are massive compared to most folks
 
Personally, I would lease as it is a car allowance. That value gets you a new merc C250d or E220d SE or Amg Lines with 3-6 months initial rental.

Also opens up the 320d/520d M Sport.
 
Rotty said:
oh hang on I think I have this wrong, the government figure goes down above 10k miles in line with that you get so there wouldn't be a claim

having said that the allowance and fuel rates you are getting are massive compared to most folks
Click to expand...
Agreed! The fuel rate you'll get at 45p/25p / mile is worth a substantial chunk of money. I'd much rather get paid the full HMRC allowance by my company instead of claiming the tax back on the bit I don't get. I'd be ~£1500 a year better off from that alone with the mileage I do.
 
Havana_UK said:
Agreed! The fuel rate you'll get at 45p/25p / mile is worth a substantial chunk of money. I'd much rather get paid the full HMRC allowance by my company instead of claiming the tax back on the bit I don't get. I'd be ~£1500 a year better off from that alone with the mileage I do.
Click to expand...
My company offers 3 choices - company car (BIK), car allowance (monthly wedge + fuel costs), or the HMRC rate. The middle option seems to work out the best on paper. The BIK scheme for low effort. The 45/25 rate isn't as effective imo.
 
Whether the HMRC rate alone works out better than monthly allowance + fuel reimbursement depends on your monthly allowance. If the allowance is very poor than the HMRC rate on its own may be a better deal, but it depends on your mileage to an extent as well.

I get allowance + fuel costs (at HMRC company car advisory rate, currently 21p / mile for >2000cc petrol), and I claim tax relief on the difference between that rate and the 45p/25p HMRC rate for private cars.

When I take into consideration the company car tax I am NOT paying (was around £230/month), which offsets the income tax I AM paying on the allowance, plus the "profit" I make on the fuel claims plus the tax relief I get it works out to around £9500 / year to run my own car and be no worse off than I would be in a company car. That obviously has to cover:
- purchasing the car & depreciation
- insurance
- VED
- servicing & maintenance
- tyres & other consumables
 
Scrutinize said:
Personally, I would lease as it is a car allowance. That value gets you a new merc C250d or E220d SE or Amg Lines with 3-6 months initial rental.

Also opens up the 320d/520d M Sport.
Click to expand...

Surely the best value is the personal loan as he gets to keep the car?

I'd probably go with the Volvo, it should be the most comfortable to do 30k miles in.
 
I'd double check your employer's policy. It's highly unlikely you will get a car allowance AND 45p per mile. If you do its the best car allowance scheme I've ever come across!

Usually it is either 45p per mile or 10p-20p per mile and an allowance.
 
Abyss said:
I'd double check your employer's policy. It's highly unlikely you will get a car allowance AND 45p per mile. If you do its the best car allowance scheme I've ever come across!

Usually it is either 45p per mile or 10p-20p per mile and an allowance.
Click to expand...

correct
 
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