Company car vs allowance

[Thaksins Love Child]

Has anyone got any experience on this?

I've been given the option of either taking an allowance of up to £400 for a car or have a company car. I've been looking at the BMW 520d due to it's low emissions but cannot work out which deal would be best for me.

If I take the allowance then I understand I will be taxed at 20% on that which will leave me £320 per month for the car and insurance. Plus I will have to pay things like tax and any services/repairs myself.

I believe I will pay 40% if I go for the company car option. BMW have quoted BIK at £3,136.14 (£261 per month) based on my tax code. Insurance, tax, services etc will all be covered by the company.

So based on the above, the company car option seems to be the deal to take. I feel like I'm missing something though as other people have told me to take the allowance.

Any advice appreciated.

 

[Bluemanc100]

Check your tax bracket carefully because if you take the car and you slip into the 40% tax area then the costs is doubled (sounds obvious but check the impact based on the P11D value (Leaseplan uk has a good company car tax calculator on its website even if this is not the supplier)

Its hard to justify the allowance when you are offered a car because it is risk free on your part, if it needs tyres etc, the company pay

I have just been offered both also and opted for a plug in hybrid, there are two standout models available, the Audi A3 eTron and the Mitsubishi Outlander PHEV (The GX4i has everything you might need) both come in at £60 tax per month tops even at 40%

I actually didn't get the hybrid as a Mercedes A220 Sport AMG came up within the business but I was able to convince them that I should be compensated for the extra tax so I have the Merc at the £60 per month now

I'd 100% choose the Mitsubishi however if I could have, you pay very low tax and the company can write off 100% of the car's value (circa £34k) in year 1.... no brainer

 

[crazyg]

Is fuel provided by the company for your private motoring, as that will also have an impact.

 

[willipp]

I had the same choices last year and for me it made no sense to take the car. I was offered either £5,300 in my wages or a car based on the bracket within the car scheme. However the decider for me was the additional tax you pay if you take the car.

For me i was offered at 28k car as part of the scheme with i think 9% emissions. That worked out an additional £200 a month out of my wages if i took the car.

I took the cash which worked out about 300 a month. I also saved an additional 200 tax a month id of paid if id taken the car. I went out and got a loan and bought myself a A3 which i pay 240 a month for. I'm no expert, but taking the car just made no financial sense to me.

 

[Thaksins Love Child]

Is fuel provided by the company for your private motoring, as that will also have an impact.

If I take the company car option I will just pay 10% towards personal use. Roughly £6 per month.

If I take the allowance, I can claim back 20p per mile.

 

[Bluemanc100]

I had the same choices last year and for me it made no sense to take the car. I was offered either £5,300 in my wages or a car based on the bracket within the car scheme. However the decider for me was the additional tax you pay if you take the car.

For me i was offered at 28k car as part of the scheme with i think 9% emissions. That worked out an additional £200 a month out of my wages if i took the car.

I took the cash which worked out about 300 a month. I also saved an additional 200 tax a month id of paid if id taken the car. I went out and got a loan and bought myself a A3 which i pay 240 a month for. I'm no expert, but taking the car just made no financial sense to me.

swings and roundabouts, it's a very subjective decision....

If I'd not been able to swing the company paying the difference in tax for mine I'd have taken the allowance

The only thing I would say is that you took all the risk, i.e. you bought a car or could have leased one. If you get laid off (hopefully you wont) then it's a ball and chain to keep or try and sell

I was getting £0.45 a mile to use my own car and didn't really need one but now my car is for sale so I can whack the cash back in savings (or buy another motorbike)

 

[Southbanken]

Got no idea which is best but if you are thinking of remortgaging any time soon then your car allowance is taken into consideration as part of your salary. Might not be relevant but is worth knowing if it is relevant to you.

 

[willipp]

I had the same choices last year and for me it made no sense to take the car. I was offered either £5,300 in my wages or a car based on the bracket within the car scheme. However the decider for me was the additional tax you pay if you take the car.

For me i was offered at 28k car as part of the scheme with i think 9% emissions. That worked out an additional £200 a month out of my wages if i took the car.

I took the cash which worked out about 300 a month. I also saved an additional 200 tax a month id of paid if id taken the car. I went out and got a loan and bought myself a A3 which i pay 240 a month for. I'm no expert, but taking the car just made no financial sense to me.

swings and roundabouts, it's a very subjective decision....

If I'd not been able to swing the company paying the difference in tax for mine I'd have taken the allowance

The only thing I would say is that you took all the risk, i.e. you bought a car or could have leased one. If you get laid off (hopefully you wont) then it's a ball and chain to keep or try and sell

I was getting £0.45 a mile to use my own car and didn't really need one but now my car is for sale so I can whack the cash back in savings (or buy another motorbike)

Yes that was the big draw to the company car. Anything went wrong with it it got sorted, i lost my job i just handed it back etc etc. It was the tax element that put me off as i knew that came out of my pocket.

 

[Biffo123]

Lots of variables to take into account in order to give you a definitive answer , such as how many miles a month you would be claiming back and your own personal salary details and tax implications etc

My advice would be to stick into google " Company car versus cash allowance " and there are pages of stuff to read including some great calculators to help you make the right choice for you

 

[John69]

Has anyone got any experience on this?

I've been given the option of either taking an allowance of up to £400 for a car or have a company car. I've been looking at the BMW 520d due to it's low emissions but cannot work out which deal would be best for me.

If I take the allowance then I understand I will be taxed at 20% on that which will leave me £320 per month for the car and insurance. Plus I will have to pay things like tax and any services/repairs myself.

I believe I will pay 40% if I go for the company car option. BMW have quoted BIK at £3,136.14 (£261 per month) based on my tax code. Insurance, tax, services etc will all be covered by the company.

So based on the above, the company car option seems to be the deal to take. I feel like I'm missing something though as other people have told me to take the allowance.

Any advice appreciated.

I'm not an accountant but my understanding is that you get taxed on a car allowance as if it were salary. This would mean tax of 40% on any earnings including the car allowance at over £42k per year. I don't understand why the tax on the car allowance would be at 20% but on a company car at 40%.

The other consideration is that the company car tax will be paid out of your existing income. So on the figures you have mentioned (if the tax rates are correct), you would have £581 per month to spend on your own car as the break even point. And you have the flexibility to buy what you want and change it when you want. The downside is you need to find the money to buy the thing or put down a deposit.