I have two weeks left in my current job (Hurrah!!!)
My new job will mean I am out on the road more and I will get a car allowance of £4600 a year. Not bad, but a company car would be better, on the plus side I will have the car if I were to leave the job.
So my aim is to run my 10 year old golf estate for a year while banking the cash then buy a new car next year, with the banked cash, trading in my old car and a small loan.
Although I am now tempted to just get a new car.. What do you do with yours? What have you got?
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Car allowance from work. Who gets one?
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Posted 11 months ago #
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I would rather have a company car to be honest. But then my commute is only 15 miles each way so fair enough. My money just gets added into my normal wage and is treated as my normal wage.
If I were being sensible I'd bank it and use it to buy a decent car/pay for the upkeep but my wifes wages do that.
Posted 11 months ago # -
Just remember that you will pay tax and NI on the car allowance... it's effectively just a top up on your salary.
Also, do you get a decent mileage payment as well? T'other half found that her mileage payments dropped to the same as the company car folks once they gave her a car allowance.
Posted 11 months ago # -
Pretty much everything funkynick says. Whilst it IS a salary top-up, you need to check if you're restricted to certain cars. Maybe not as strict a policy as a company car - but some businesses do expect employees to own certain cars and maintain them to a certain standard for XYZ reasons.
I decided to keep my A4 and just accepted the allowance as an extra few grand. Mileage allowance can be pants - so get that checked too.
Posted 11 months ago # -
Company cars are no longer a perk, but if you are a lower rate tax payer then it'll cost you half as much as if you pay higher rate tax.
I went for the cash option - £6.5k a year before tax, but that isn't really enough to cover buying and running a car (depending on what finance you do). I only get about 14p per mile too, which doesn't cover what fuel costs me - luckily I don't do much business mileage.
Fuel cards are expensive too, unless you do a lot of private mileage.
Posted 11 months ago # -
Codswallop from wallop above, I get £6100 a year and 14p a mile
It's easily enough to run my car, I will have paid it off from my allowance in 6 months (loan was taken over 3 years) keep it for another 12 months after than pass it onto the wife
Don't forget you can claim extra milage allowance upto 45p (as of may this year) back as a tax adjustment and also that you wil pay alot less tax than on a compNy car and fuelcard
The milage payments generally pay for my fuel with a bit left over (costs me on average 11p a mile in fuel) to save for servicing tyres etc, the allowance pays of the loan, insurance and rest of routine servicing tyres etc and the tax adjustment helps cover a fair bit of my private milage fuel costs
Since opting out I am far better off, probably by around £500-800 a year plus I own the car
But like anything I guess it depends on want you want to run
Look into it and budget well and it can work, decide you want to runaround in a fancy guzzling 4wd or sports car and it will cost, for me like for like it worked out better but I slightly downgraded with view to making a bit of cash on the dealPosted 11 months ago # -
I had a car allowance of 4500. I bought a cheap diesel Peugeot 307 and claimed 11ppm on trips (or whatever rate the IR "recommended"). I did around 20,000 miles a year in it and sold it when I emigrated for 600. I have entered tax claims on the mileage rates (as iain1775 says) and am waiting for a few thousand back. Even with servicing, repairs, tyres, insurance etc, salary-wise I was still much better off doing that than getting a company car and being taxed even more for the privilege.
That said, if you are prepared to lose money through the tax you will get but would rather have a new car and hassle-free driving, go for the company car.
Posted 11 months ago # -
If you are a higher rate tax payer do the sums. For most 20k cars I would have ended up paying almost 20k in 3 years in tax, loss of allowance and personal contribution. No thanks. Bought a 3 yr old octavia l&k instead and is costing me well under 1/2 that to own Inc. Depreciation
Posted 11 months ago # -
This used to be a no-brainer for me and I went down the allowance route for a number of years for all the reasons described above. I've recently gone back on to a company car however as if you choose the right car (ironically for STW many of the lowest emissions in each class are BMWs) which has the right engine (and therefore tax) it doesn't need to be as expensive as you might think.
What swung it for me was a bad month when a major service that included water pump and cambelt (budgeted), coincided with a couple of tyre-writing-off punctures (not budgeted), added up to a big bill. My mileage also increased due to a new role and despite an increase in c/a I could see the car that I owned and was my problem becoming worth less and less and having more and more potential issues.
I get in "my" company car now and if there is a service light on, phone Lex and don't give it another thought.
Posted 11 months ago # -
There's not many places that will happy about you pocketing the car allowance and running a 10 year old Golf. Every place I've worked that has them will have a mileage/age limit, and usually some restrictions around it being "suitable" for the job.
Bear in mind that (as said) car allowance is taxable income so if you're a basic rate taxpayer then it's not £383 a month, but more like £264. If your basic salary is over about £32k then at least some of the car allowance will be subject to higher rate tax so it will mean even less in your pocket each month.
Mileage allowance can make up for some of that though assuming your car is fairly efficient - I get 20p a mile but a diesel averaging 48mpg only costs 13p a mile in raw fuel costs (and that's at 1.39 a litre). Do 15k business miles a year and that's just over £1000 towards maintenance, insurance, tyres, etc.
I run a Honda Civic on my allowance which I bought as a 6-month-old ex-demo car. Depreciation plus maintenance, tyres, tax, etc costs has been about £225/month over the couple of years I've had it. On top of that is insurance (but it's bloody expensive for me, living and parking on the street in North London) and fuel. Overall it's well within my car allowance and mileage allowance combined, even with the pricey insurance.
Some people go for something nicer - you can take the view that you'd be owning and running a car anyway, so divert what you would have paid into this instead. I just view my Civic as a "free" car, and the change helps to pay for bikes
A lot of it depends on the mileage you'll be doing and reimbursement you get - I'm lucky to be based at home so as soon as I leave the house I'm racking up travel/mileage expenses that I can claim back. If you're based in an office most of the time but need to do the odd trip every few weeks then it may not be so beneficial.
Posted 11 months ago # -
I forgot to mention this last night, and nobody else has mentioned it either...
That is that you can claim tax relief on the different between what your company pays in mileage allowances and what HMRC states is the maximum tax-free rate for people using their own cars...
So, if you are getting 14p per mile while the tax-free HMRC rate is listed as 40p per mile, then you can claim the tax back on the difference... so for a lower rate tax-payer that would be 20% of 26p (5.2p) per mile.
While this isn't as good as getting the 40p rate, it's still something.
Posted 11 months ago # -
funkynick - HMRC rate is 45p per mile now.
Posted 11 months ago # -
Every place I've worked that has them will have a mileage/age limit, and usually some restrictions around it being "suitable" for the job.
Yeah, you need to check this. I had the same idea at first, but at my place if you take the allowance then you have to meet some fairly strict criteria as to what you buy. No less than three years old, that sort of thing. You're representing the company so they don't want you turning up at a customer's site in a C-reg Ford Escort, even if it is a Ghia.
I don't know anyone who's taken the allowance in preference to a car. It's hassle-free motoring.
Posted 11 months ago # -
Yeah, you need to check this. I had the same idea at first, but at my place if you take the allowance then you have to meet some fairly strict criteria as to what you buy. No less than three years old, that sort of thing. You're representing the company so they don't want you turning up at a customer's site in a C-reg Ford Escort, even if it is a Ghia.
This is interesting. My company couldn't care less what car I buy with mine. In fact they're actively discouraging people from using cars to get into work but they'll not stop paying the car allowance.
Posted 11 months ago # -
I used to work for a large blue chip corporation and a number of us in the sales team took the allowance and ran a private secondhand car. If you don't care about having a shiny new car (I still had a better car than the company car scheme would have provided) it works out much better financially. Note that if your employer won't give you 45p/mile for the first 10k/yr then HMRC will let you claim it back against your tax.
As a business owner I'd be happier dealing with a rep turning up in an old car than a flash new one - an overly valuable car would lead me to question how much I'm being charged and drive a harder bargain. The reverse of the Columbo effect.
Posted 11 months ago # -
+1 company car.
I run my own 2006 BMW 318 Tourer and had to shell out £1000 for a new clutch in January, £400 for tyres in March, £440 insurance in April and am currently waiting to take the car into a garage to diagnose an engine fault light which will probably be expensive.
When I had a company car I had none of these worries and could budget far more effectively.
Posted 11 months ago # -
When I had a company car I had none of these worries and could budget far more effectively.
But paying out about that per year in tax to have it, presumably.
Posted 11 months ago # -
45p per mile?! I missed that and have been charging 40p! Glad you pointed that out geoffj - just made me £50 on my June expenses! Owe you a pint for sure!
Posted 11 months ago # -
Well I don't get a choice to take an allowance (which I would prefer) Company says all high mileage drivers must have Company Cars to ensure they are 'safe' and in a suitable car. Low mileage drivers can take an allowance but car must <5yrs old and less then 100k miles.
Saying that it is nice not to have to worry update any unforeseen expense so there is something to be said for themPosted 11 months ago # -
I know someone who works for IBM and runs his own car pocketing the allowance. I think it's one of those flexible benefit packages - so either the company leases the car for you or you take effectively extra salary.
Posted 11 months ago # -
I opted out many years ago. I ran my own flash motors but now can't be bothered. I'd rather make money from it.
It was a fantastic move for me. I get about £8000 pa allowance and do 30,000 miles a year at (now) 45p per mile. I always looked at it as the tax that is taken off your allownace you get back for not having a co. car.
My current car car cost £7500 and had 19,000 miles on it. It does 50mpg. I've had it a year and I'm going to px it against something of teen-thousand miles but a year younger and I've lost £1000. That means I'm £7000 in profit before I get near my mileage payments.
By the way, the mileage payments are tax free up to 10,000 miles, and half tax after that. (HMRC ignore payments up to 25p per mile over that). If you submit your fuel receipts, your company can claim back the VAT on the business miles portion of your fuel spend.
Look at the mileage payments; that's a bigger lump than you might think.
Posted 11 months ago #
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