The arrival of kid no3 means that I’m looking to hand back my company Golf and buy an S Max for about 12k with a personal loan. I’ve done some calcs but am not sure how it all works out in terms of what rate the BIK taxation I wouldn’t be paying will be taxed at IYSWIM? I assume it would just go on your salary and then be taxed at 40% if over the £32k threshold? And the same for the car allowance? And do either of these relate to your tax-free allowance figure?

I’d be happy to pay for an IFA or similar to cast an eye over the figures, failing that any recommendations for an IFA in the Worthing area?

Cheers now.

AFAIK when you get rid of your car your tax free allowance will be upped as you now longer pay BIK on it. A car allowance is just a bit of extra cash added to your salary so will be taxed at whatever rate you pay, or will pay of it bumps it into the next band.

Speak to HR though as they should be able to explain it all to you.

The BIK would be replaced by your car allowance so if your BIK is £3,000 and your allowance is £4,000, then you would be taxed on an additional £1,000 at your marginal (highest) rate, so if you are a 40% tax payer you would pay £400. You would also pay NIC on an allowance but not on BIK.

as someone who’s done this twice I’s say take the car every time. If you visit Comcar Company Car Tax Calculator you can see exactly how much it will cost you for the car. I used to get £600 a month allowance and by the time you get taxed on it you can’t get a decent car without relying on the 45p/25p 10,000 miles onwards to top up the fund.

You then have the risk of being lumbered with the car if you lose your job, it’s your insurance so if you have a bump your insurance goes up etc etc…

For me, it’s always the car. I’m looking at a 530D M Sport Touring which will cost me about £350 a month in tax,including fuel benefit. there’s just no way I could run a £43k car for £350 a month and then walk away from it if I want to change job….

as someone who’s done this twice I’s say take the car every time.

I think it depends upon what you want, if you like expensive cars then this is probably true, but if you have no wish or need for one, then cash may make more sense – as it did for me – but I doubt I have done 1,000 business miles in my life.

Cheers for the reply Mick, I’m happy with the company car benefits too but unfortunately I need a bigger car and our list is very limited, the only one suitable is a Corolla Verso which isn’t much bigger than the wife’s Almera Tino. Parents in law have got one and the seats really aren’t comfortable which is an issue for me as I have a bad back. Plus my lease isn’t due for renewal for another 18 months and the kids aren’t getting any smaller.

I know what you mean regarding being lumbered with it hence using a personal loan so the car can be sold on easily if need be. Another downside to running your own car is that if something expensive goes wrong that comes out of your pocket too. Hmmmm.

The other option is to do a personal lease, they are getting popular again and depending on how many miles you do you can get into some very decent cars and the maintenance package would protect you from any bills.

and then walk away from it if I want to change job….

Or you could take it with you. Did you not consider that?

I opted out years ago and it’s been great. If you want to run a new car then let the company take the strain. If you want something out of the ordinary then do it yourself.

I usually find something a couple of years old with low miles and keep it until the miles are showing and trade up.

Having a ‘normal’ tax code after years of hammer from the taxman was like having a double the benefit from the allowance.

Looked at leasing, seems like throwing good money after bad! Actually what it seems like is having a company car but having to deal with all the hassle – pay a big deposit, potential excess mileage costs, potential charges for damage or excess wear and tear, and being tied in if it all goes tits and you lose your job and don’t find another one in short order. No thanks, personal loan makes much more sense to me.

And any business miles you do are paid at net, so there is ‘income’.

Interesting that it’s an LLP – maybe he’s banned from being registered as a director of a Ltd company?

Swings and roundabouts… you’l never own your company car either and you’re ‘paying for it’ in BIK.

I do quite high mileage (35Kpa +) so for me running my own car is no good as it kills the value of the cars, the benefit of the lease is you have predicted costs and a lot of personal leases can be had with early termination clauses so you can just walk away without penalty.

If you gave us an indication as to how much cash you’re being offered and mileage rate i’m sure the company car drivers amongst us could give you some guidance. Admittedly, from what you’ve told us I think in your circumstances I would actually take the cash, purely down to lack of choice of car. And as Scottchegg has pointed out, it’s weird having a normal tax code and not a ‘K’ code 🙄

Car allowance is 4900, mileage about 12k a year at the moment but work in construction so could jump to 20k easily, diesel fuel rate is about 15ppm at the moment, BIK on the Golf is £54pw. Have factored a 12k loan at £360 a month over 3 years, 400 for business class insurance and breakdown, tax would be 135 and 100 a month for tyres, servicing etc. Basic salary is over the 40% tax threshold so I assume the 4900 allowance would be subject to 40% tax too?

My car allowance is pretty much the same, yes you will be taxed on the £4900, in my case @40% tax so I see around £250 per month. However, you will also have the car tax deduction back so if this was £200 per month you are now plus £450 per month.

On top of this you will get 15 per business mile (in my case 21p) at 50mpg you will make a “profit” plus the Government entitles you to 45p per mile for first 10k miles per a year so at the end of the year you can claim the tax back on the difference I.e. if you did 10k business miles: ( (0.45*10000) – (0.15*10000) ) * 40% = £1200 tax back.

Its a case of each to their own but if you are willing to run a 3 year old run of the mill car generally speaking you will be better off with the cash.

Our company is pretty good as the cost of a company car (if you choose to have one) is given as the total effect on your pay packet – all taxes taken into account. So it is really easy to compare costs.
My current car would have cost me about £700 a month on the car scheme, so £8400 a year, £25200 over three years. I bought a three year old model ex-lease for £11500 cash. in three years I spent £1100 on insurance, £750 on VED, £1500 on tyres, £2100 on maintenance, and was offered £3000 trade-in for the car. Total cost £13950, and I have claimed back about £2000 in Mileage Allowance Relief, bringing it down to £11950 and leaving me with £13250 extra cash in the bank.
Also, I would still have had a car even if I had been made redundant.
In exchange I have taken on a bit of risk, and it is slightly more hassle to arrange repairs if they are needed. Overall, I think I win.

Our company is pretty good as the cost of a company car (if you choose to have one) is given as the total effect on your pay packet – all taxes taken into account. So it is really easy to compare costs.
My current car would have cost me about £700 a month on the car scheme, so £8400 a year, £25200 over three years. I bought a three year old model ex-lease for £11500 cash. in three years I spent £1100 on insurance, £750 on VED, £1500 on tyres, £2100 on maintenance, and was offered £3000 trade-in for the car. Total cost £13950, and I have claimed back about £2000 in Mileage Allowance Relief, bringing it down to £11950 and leaving me with £13250 extra cash in the bank.
Also, I would still have had a car even if I had been made redundant.
In exchange I have taken on a bit of risk, and it is slightly more hassle to arrange repairs if they are needed. Overall, I think I win.

I use to do the same kinda thing, except an older exec car and a new motorcycle. Quids in, big time like you – nearly £100 pw net 🙂

£700/month in BIK on a company car!? Blimey what were you driving!?

I’ve got a ford focus and that’s only £40/month!

Crispo – I’d wager that £700 includes BIK and car allowance. Still a fair whack though, I want to join b r’s company!

£40 a month BIK for the Focus, you sure? £40 a week sounds more like it and that’s still cheap!

Yep £40/month at 20% tax.

P111d is something like 16% on 18k car value, so then you pay 20% of that in tax. Ok so I think it’s actually £48/month.

All our company we have a spreadsheet with all car grades worked out. Even an Audi a6 is only £200ish/ month at 40%

Very much down to the individual scheme and your own situation – only car/main car etc. Definitely worth getting proper advice. I take the car, meaning our other car does minimal mileage etc. Works better in our own situation but not for all

Company cars become a lot less attractive when you pay 40% tax….

Ok, getting my head round this a more now;

Golf BIK is £1216pa or £104pm
Car allowance is £4900 which will be taxed at 40%, with NI say 50% overall so £2450 or £205pm
Tax relief of 25ppm on 10k at 40% = £1000 or £83pm, with the reduced over 10k allowance let’s say £100pm
Total = £409

Personal loan of £12k over 3 years = £360pm
Insurance = £30pm
Tax = £15pm
Servicing tyres etc = £100pm
Total = £505pm

Does this look right? If so it’s going to cost me around £100pm to run my own car along with all the associated hassle and risks. Hmmmm.

Not worth it, except you aren’t comparing like-for-like – company Golf vs private S-Max, so is a bigger car worth £100pcm?

And tbh spend less on your car, and the numbers then work – or go for the smallest company car and just use it for work and where it suits. Then use the saving to add to your wife’s car and have that as the better one.

Easier for me, as I was comparing a company 530i against buying/running my own, so a lot more BIK to play with.

NI will be 2% not 10% so that brings it much closer and you will own a car after 3 years

wurzelcube – Member
My car allowance is pretty much the same, yes you will be taxed on the £4900, in my case @40% tax so I see around £250 per month. However, you will also have the car tax deduction back so if this was £200 per month you are now plus £450 per month.

On top of this you will get 15 per business mile (in my case 21p) at 50mpg you will make a “profit” plus the Government entitles you to 45p per mile for first 10k miles per a year so at the end of the year you can claim the tax back on the difference I.e. if you did 10k business miles: ( (0.45*10000) – (0.15*10000) ) * 40% = £1200 tax back.

Many apologies for the slight hijack, but Wurzelcube has got me thinking…

My company also pays me 0.15p / mile for fuel. I had no idea I could potentially claim the difference on the first 10k miles. Does this apply in all cases?

My car is a leased jobbie; the company gives me a small allowance (£250 / month gross) and I pay an additional £120 on top (and get nailed for taxes etc). Can I claim the additional mileage?

I tried to read up about it on the HMRC site, but I seem to have a weird word blindness for this kind of stuff (don’t get me started on pensions!)

TIA

2% NI makes it £60 per month more. The thing is the wife’s car is a petrol and she only does about 3-4 thousand miles a year with a lot of short runs so a diesel is probably not a good idea for her. She also wouldn’t want a car bigger than what she has now due to parking/general female fear of big vehicle issues. When we go away her car isn’t big enough though, drove to Germany and back over Easter and I had to have my seat forward to avoid squashing my boy’s legs, being 6’4″ with a bad back doesn’t help, I was crippled by the time we got back. Would possibly be more cost effective to hire a bigger wagon for family holidays.

My car is a leased jobbie; the company gives me a small allowance (£250 / month gross) and I pay an additional £120 on top (and get nailed for taxes etc). Can I claim the additional mileage?

Are you putting the monies paid against tax?

freddyg – you can claim tax relief on the difference if you run your own car but not on a company car. Don’t know about a lease car though I’m afraid. Sure someone will though, I’m sure geordiemick would if he looks back in.

If the company leases the car, you can’t, but the £120 you pay should be deducted from your BIK so if BIK is £5,000, amount taxed is £3,560.

Are you putting the monies paid against tax?

Aaarrgghh!!! There it goes again?!

I’ve had a look at my payslip. The companies contribution isn’t shown, but the company deducts £120 per month from my salary as a “private use charge”. Is that what you mean?

I’m a 40% tax payer and my code is 415L.

Ask me something easy like designing a network infrastructure and I’m all over it!

Ask the company nicely if they can give you a bigger car?
If you do enough business miles, you’ll be better off with the larger S-Max if you buy it privately, I reckon it used to cost me about £350 a month all in to run a 10k car inc. fuel, depreciation, servicing and minor repairs etc doing 20K a year.

Buy it at 18 months for half new price, sell 3 years later. Considering you’re probably paying £150 a month on a cheap to run golf in tax, you’ll be worse off to the tune of £200 a month straight away, but if you can squeeze the maximum 10K a year milage allowance through work miles, that nets you £330 a month in tax free income.

Bearing in mind i’m including fuel in the first figures, that’s £130 a month in the kitty for repairing it if something big goes wrong, or all being good it’s £130 a month in the kitty to replace it with, which in 3 years would be £4680, a nice chunk toward the next deposit. Bear in mind if you take a car allowance instead of fuel payments, it’s not tax free so it’s not as efficient a way of doing it.

Having said that, i’ve just switched to a company car! But I could buy what I wanted, so if you need a certain car you can’t have on the company the choice is kind of made for you. I also keep my PAYE below the 40% threshold – I wouldn’t be doing it if I was paying 40% tax on it as it would double in cost.

Just looked at your comparison above – why have you got the milage relief and car allowance in with the company car scheme?

Shouldn’t it be a straight company car + fuel (if applicable) cost in tax versus the bottom costs of your own car of £505 LESS the car allowance making the cost of having your own car more like £300 a month less milage – which could be up to £375 a month depending on how many miles you do?

His numbers are fine – he is comparing the net increase in what he receives through his work (allowance less tax, tax saved from BIK and additional tax allowances for fuel) to his private costs.

Don’t forget car breakdown cover. Final point on your calculations what have you considered to resale value to be of the car in 3 years time?

Got breakdown cover already. Plan would be to get the best low miler I can for my budget and then keep it for at least 5 years or it becomes a money pit. Car allowance after the loan was paid off would then go into my pocket, prob towards deposit for the next one

Just check there’s no conditions on what you have to have.

Some companies insist on a car less than however many years old etc.

Yeah my company have that clause but it’s never enforced. One of my colleagues drives a 1999 Peugeout 306. I think a smart modern car wouldn’t raise an eyebrow if there was a clampdown. His faded to matt red paint and stick on chrome effect filler cap cover with ‘SPORT’ printed on it might though. Still, he’s been trousering the cash for three years now!

I always went with the company car option which was great doing 30 – 40 k miles a year. When I was made redundant and got another job I had to buy a car as the new company didn’t do company cars which was fine, however I was still paying for the company car via tax which was handed back in the previous job. I would check that when you hand your company car back that you are still not paying the tax on it for the rest of the financial year.

Good shout, they didn’t change my tax code for a couple of months when I took the car which left me owing HMRC a few hundred quid….