Company car - New Tax Year

[eob]

I want to say. "I brought my own car. Screw you, your free cars and tax back "

But people may take offense.

As a company car driver, you also have to take in to account the savings in wear and tear, road tax, insurance and depreciation on private cars.
I was running a private 530d Sport before my current Passat. To break down my yearly costs for the BMW: £3720 finance, £215 road tax, £800 for a set of tyres, ~£300 servicing, £450 insurance. Thats a total of £5,485 a year. Not to mention that in the three years that I owned it I lost 50% of it's value.
When I was offered a co car I jumped at the chance. I now pay £1,528 annual tax. I also get to change it in September for an A4 S-Line (fingers crossed, pls, pls, pls).

There are two sides to every coin.

[Col]

The other side of that coin being taking a car allowance in lieu of of the company car.

If you do this carefully and don't mind driving an older car (like I do) you are quids in.

As cars these days are generally pretty good in terms of reliablity, servicing them yourself (like I do) is quite straight forward as well.

The biggest question is; "How much value do you attach to having a new car on your drive every three years?"

To some, it is paramount, wear/tear, servicing, insurance and in some cases fuel taken care of. The biggest plus is the lack of worry. But you pay for it.

To others, like myself, I couldn't give a monkies about keeping up with the Jones's and would rather have that cash (via the allowance), or a fair wack of it to spend on other things. There is a bit of risk and worry involved obviously, but more of of your money is yours to spend on what you want rather than financing something that sits idle on your drive or works car park for 22 hours a day.

[rich164h]

The other side of that coin being taking a car allowance in lieu of of the company car.

If you do this carefully and don't mind driving an older car (like I do) you are quids in.

That defintely can be true but I'd add a caveat that it does vary massively depending on personal situation with regards to tax, the individual company car scheme, number of miles per year, car allowance value vs lease cost, the sort of car you want to own etc

For me I took the car allowance for three years and have recently opted in to the company car scheme. Previously I wanted to drive a car that my company car scheme wouldn't allow (a VXR220 and then an A3 3.2 3dr) but i now have a son and my needs have changed (diesel estate) so that the company car scheme limitations work out ok. By my estimates the costs between running a brand new A4 avant under the CC scheme and running a 3 year old A4/6 avant privately were almost identical. There was no way I could run a brand new A4 for the same amount. so for me it was a no brainer. For someone else in a different situation the result would be different.

It also comes down to how you prefer to manage you money each month. The CA give you a fixed income but with unknown monthly outgoings (which could work in your favour or against), whereas the CC scheme gives you a lower income (loss of CA) but fixed outgoing (known car tax) each month.

[Col]

Totally agree with all you have said. There are a lot of variables.

Having given up a company car eight years ago, I have always made money on running my own.

A big bonus is the additional tax relief that can be claimed against what your company pays you per mile against the inland revenues rates. Typically this has always been a rather nice fat cheque every year of at least £2k for me.

Saying that, I will struggle to make as much this year as my current car is a bit more pricy than those that have gone before. I'm still going to be doing quite well out of it but not as well as previous years.

If you can do and live with the following, then I'd say a car allowance is better;

1, Don't mind an older car.
2, You can look after as best as you can the car i.e. basic servicing.
3, Do a reasonable amount of business milage whereby you can claim tax back against paid vs IR rates.

[rich164h]

Exactly.

For me the company car/allowance is perk rather than essential for my job so I only do the bare minimum number of business miles per year (really only from home to the airport as most of my travel is elsewhere in europe). I certainly wouldn't be looking at a £2k cheque each year. If I did it would be the car allowance every time for me.

[eob]

Exactly.

For me the company car/allowance is perk rather than essential for my job so I only do the bare minimum number of business miles per year (really only from home to the airport as most of my travel is elsewhere in europe). I certainly wouldn't be looking at a £2k cheque each year. If I did it would be the car allowance every time for me.

Yep, I'm the same. The mileage I cover daily (70 miles) is all travelling to and from work. I only occasionaly have to drive to location, generally I fly.
But as perks go, it's not bad and as I've said, in my personal situation means that I was much better off.
And yes, I do like having a shiney new car on my drive every three years.

[B6Andy101]

Not understanding the ins and outs of company car tax system doesn't make you simple minded.

Say, for example, you have a 30k company car for three years. How much would this cost you in tax?

ABout the same as it costs you to insure yours for three years

[B6Andy101]

Totally agree with all you have said. There are a lot of variables.

Having given up a company car eight years ago, I have always made money on running my own.

A big bonus is the additional tax relief that can be claimed against what your company pays you per mile against the inland revenues rates. Typically this has always been a rather nice fat cheque every year of at least £2k for me.

Saying that, I will struggle to make as much this year as my current car is a bit more pricy than those that have gone before. I'm still going to be doing quite well out of it but not as well as previous years.

If you can do and live with the following, then I'd say a car allowance is better;

1, Don't mind an older car.
2, You can look after as best as you can the car i.e. basic servicing.
3, Do a reasonable amount of business milage whereby you can claim tax back against paid vs IR rates.

Spot on. Agreed. Just have to be careful if the service throws up something unexpected that you havn't budgeted for.

If you take the allowance from our compay you have to run a car less than 5 years old to qualify. Kind of defeats it for me.

[rich164h]

Say, for example, you have a 30k company car for three years. How much would this cost you in tax?

It really depends on what car you want and how much you earn (ie. which tax band you fall into).

Some examples (and not getting into the fuel benefit side of things):

Employee at basic rate of tax-
A4 3.0tdi SE saloon (~£30k) = ~£125/month -> £4500/ 3years
Subaru Impreza STI (~£30k) = ~£194/month -> £6984/3years

Employee at higher rate of tax-
A4 3.0tdi SE saloon (~£30k) = ~£250/month -> £9000/3years
Subaru Impreza STI (~£30k) = ~£353/month -> £12708/3years

Remember also that someone that can have a company car probably has a choice about whether to have one or take the car allowance instead. So someone opting for the company car will also loose that allowance which therefore needs to be added to the above figure to show the real difference between the two schemes.

Assuming that value is £500/month (it could be more or less depending on the individual but seems realistic for someone looking at a £30k car) that comes to £18000 gross, or £14400 net for the basic rate tax payer, or £10800 for the higher rate payer (only deducting Income tax and not NI/pension etc etc for simplicity for the calculation).

Employee at basic rate of tax-
A4 3.0tdi SE saloon (CC/CA difference) = £18900/ 3years
Subaru Impreza STI (CC/CA difference) = £21384/3years

Employee at higher rate of tax-
A4 3.0tdi SE saloon (CC/CA difference) = £19800/3years
Subaru Impreza STI (CC/CA difference) = £23503/3years

Of course if you take the car allowance you'd have to pay for buying the car, running/maintaining the car with all bills and also take the depreciation hit, but I think this shows that taking a company car definitely isn't a cheap or even "free" option!!