MegaSack DRAW - This year's winner is user - rgwb
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Hi all.
Looking at starting a new role and have the option of car allowance or company van( like a pick up)
I believe I would be able to use it for personal use too.
How does it work ?
How much would I pay ?
Should I consider the allowance instead.
Thanks.
If you can use any company vehicle for private use you have to pay a benefit in kind (BIK) tax, basically the benefit reduces your tax free allowance.
It is based on the vehicle emissions level and the list price of the vehicle. There are lots of different bands for emissions.
The way is works is that for example, a £30k car has emissions which equate to a 25% banding then you get your tax free amount reduced by 25% of £30k which is £7500. That equates to £7500x20% reduction in your pay per year for a lower rate taxpayer - £1500 in this example or £125 per month. If the emissions were higher at 30% band then £30k x 30% x 20% would be £2000 per year or about £165 a month.
Electric or plug in cars are set to be a very low tax band so you can get very expensive cars and pay not much tax on it eg an electric car is at 1% right now so £30k x 1% x 20% is £60 a year or £5 a month tax!!!
If you are in 40% tax band you pay double the amount of BIK tax on your car!!! So you can see for higher earners electric cars are very cost effective right now.
On top of all this your employer will probably make you pay a contribution towards the cost of a car. I can get a basic fiesta for free plus the tax but if I want an Octavia it’ll probably cost between £70 and £140 a month on top of the tax depending on spec.
VANS/PICKUps used to be cheap as you could class them as commercial vehicles and pay a set (and relatively small compared to a car) amount of tax. This is why there were loads of pickups around at one point! However this option has been clamped down on and you have to choose very very carefully to get the commercial rate. Vans tend to have a high amount of benefit in kind tax if you can’t get the commercial rate as they are a) expensive and b) aren’t very good on emissions due to bigger diesels engines. When I looked at it as an option for me it was way out of my price range even for a basic van.
Sounds like the smart thing to do would be get an electric van then 🤷
E-Expert ahoy
As long as it can carry at least a ton in the back then its something lkke £55 or £110 a month in BIK. Thats why i had to have a SWB Transit Custom sport rather than LWB
There is some ongoing thing aboout Coca Cola Kombi vans attracting higher levels of BIK , so if its a T5/T6 make sure its a T32 variant as i believe its the only one that can officially carry a ton. Oh and a bulkhead helps too so you can show the load area is separate to the cabin.
If you can use any company vehicle for private use you have to pay a benefit in kind (BIK) tax, basically the benefit reduces your tax free allowance.
All depends how the scheme works. The wife has a company car but it is treated as her personal car for tax reasons (clever scheme where they lend you the money to buy the car and you pay the interest each month, the tax liability is just the benefit of the loan). So personal miles are free and she gets to claim the tax back on her work mileage, so in a normal years gets several £1000 tax benefit from the mileage. Bit of a perverse scheme as you are financially incentivised to maximise work mileage.
If it's an LCV (Light Commercial Vehicle) then the BIK is fixed and not related to the emissions.
It's going to be a 4x4 pick up like a Mitsubishi l200 etc.