Big a1

Hi folks,

After a bit of advice on the company car allowances...

At present I am in a job which provides me with a Pug 307 (absolutely horrible car in every respect) that is insured etc and I get a fuel card. I am not too sure how much i'l be taxed on it as I have only been in the job for a couple of months, but I do have to pay for some private mileage which I think reduces the tax a little.

Question is I am considering another job which does not provide a car but gives an allowance of 40p per mile for the first 830ish miles a month and is then 20p thereafter. I am told that I don't get taxed on this??
My estimated mileage would be around 2k a month which equates to £550 ish.

Is this a good deal? It means that I will have to buy my own car and run it, however at least I will have an asset at the end of 2yrs or whatever.

Very little experience with company cars so was hoping someone could give me abit of advice on this one....

Thanks

boxst

Hello

You should get a car allowance and THEN payment for Petrol etc..

About 20p/mile is average if you get the allowance on top. The allowance varies, but should be £400 - £700.

Steve

///\oo/\\\

Not sure what steve is saying but:

Some employers will give you the choice of car or cash allowance, both subject to tax.

You don't say if the new job provides such a cash allowance?

Some employers will also pay you the maximum allowable tax free business mileage allowance of 40 p per mile for the first 10,000 miles and 20 p per mile thereafter on top of the cash allowance because you are running your own car.

Some, however, will only pay a lower rate of 12/15 p per mile if they also pay you the car allowance in lieu of the car because they see it as effectively the same as giving you a car. This is very common among professional services firms.

You are correct that if you use your own car you don't get taxed on any mileage allowance payment up to 40p a mile for first 10,000 and 20p a mile thereafter. These are the Inland Revenue limits.

To see if it is worthwhile financially, you need to estimate your income from the mileage allowance, deduct fuel costs, servicing costs, insurance costs, road tax costs, depreciation and the cost of borrowing the cash to buy the car if appropriate.

If you don't have to borrow, then deduct the income you could otherwise have made on the savings.

That will give you a net cost of ownership.

And then compare that to the tax you pay on the existing company car and fuel card.

And then make a financial adjustment in respect of how much more or less you will earn if you take the new job.

That will let you decide which is better financially, and then you can factor in the emotional cost of having freedom of choice.

HTH

john_s

iTrader: (1)

IME, the government's maximum payment allowances for mileage (before you pay tax on it) leaves you quite a bit out of pocket.

It used to be ok to make a little bit of money, but the way motoring costs have gone up over the last few years, yet the allowances haven't, it isn't possible anymore.

John.

tmo

Company car and fuel card – no brainer but dependent upon annual mileage
Company car and no fuel card claim at the gov advised rates are 40p for the first 10k miles then 25p thereafter tax free) however most companies will pay the lower government rates 12p / 9p you then have to claim the difference upto the 40/20 but this gap is subject to your normal rate of tax and you have to wait for the beginning of the next financial tax term to claim the previous years gap.

Car allowance - then claim fuel at the gov rates as detailed above however more and more companies will only pay the lower government rates 12p / 9p.

No car allowance - claiming at the Gov rates is essential. However this is reliant upon the driver covering less than 5k miles per year, any more and you really should be getting a car allowance.

Car allowances are very much dependent upon status and essential user, these in general range from £250 - £850 per month of course these are subject to tax.

Also to be taking into consideration is the laws around Duty of Care, both you and your employer are bound by certain logical restrictions. i.e. you would not pay someone £500 per month in allowance knowing they would turn up in a 10 year old mini 1000 and cover 2000 miles a month on company business.
Service / insurance / age of vehicle / suitability of vehicle / MOT / age of vehicle, are major points which should be reviewed on an annual basis to determine the suitability and legality of the vehicle choice and continuation of the car allowance payment

^Qwerty^

Whatever you do in the future, make sure you ring up the TAX office today and tell them about your current car and card. If they don't know about them, you will get a very nasty suprise at some point in the future.
I've had this happen to me, and I've seen it happen to other people, and it really is not funny when you get a tax demand for a few £k becaue your employer didn't bother to inform them about your benefits.

This is also a good point. Our company had (or still has) rules around people who take car allowance and what type of car they can buy. Things like it must have four doors and not be over a year old at time of purchase were included. However I never saw them enforced, and thus some people ran around in bangers and put the other few hundred quid in their pocket each month.

Nimbus

Are you sure you can claim the difference in mileage rates if you have a company car?

I used to have an allowance, and my company paid something like 12p per mile. Since I had my own car I claimed the tax back on the difference. However, I now have a company car, and I'm sure I saw on the IR&C website that you can not claim the difference if you have a company car.

I'll have to do some investigation, but I thought this was the case..

Big a1

Thanks for the repsonses.

I would not actually get a lump sum per month to buy a car. The allowance is JUST 40p per mile for the first 830 and 20p thereafter.

This would work out at about £600 per month based on 2k ish miles.

So out of that I would have to pay about £200 for fuel (if i get an eco diesel)
Insurance of around £40 p/m
Tax at £16 p/m
Running incl Mot - say £50 pm

This works out at around £316 ish. Leaving me with less than £300 p/m to buy a car.

I would have to take a small loan out to get anything worthwhile, I would estimate 6k which I would pay off in a yr at a monthly repayment of £540.

So each month I would have to add about £260 of my own salary to the car (£3120) but would be left with an asset worth about £4k

Salary is an 18k basic with an OTE of 23k so take home would be about 1100 - 1350 pm. I'm 23 and live at home but would like to move out in the nr future.

Job could potentially be very good (working in an industry that I am passionate about) however it is a very small company who want results very quickly. Something I am confident about delivering. But the prospect of crashing and burning at it and being left with a car loan is quite daunting.....

What to do.....???

Scoobydid

You need to take into account the few grand that your not paying in tax also and you put this towards the loan.
I run an Audi A6 2.5, lease purchase of £350.00 per month. I do about 25 - 30k per year and rarely have to put my hand in my pocket so effectively I get the car tax free. (you could also theoretically claim the odd extra mile if you felt so inclined, although I would not condone this type of behaviour).

Has worked for me the last 4 years, however I claim 40p for the first 10K then 25p after that, your way might be better for cashflow, might try that this year.

The first 2.5 years I ran a golf TDI and I was making money on that

I look at it as the company funding my car so even if the car is worth chuff all at the end, its been paid for by the company, not you, you get your private mileage too, plus whatever tax is left.

I set up a separate account and all car costs were paid out from here and just the allowance went in, you won run a scooby on it but you should be fine with most diesels.

RichardS2005

Scoobydid - where are you leasing your car from? I'm looking at a lease cars at the moment