Company car vs allowance

[John69]

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.

If your company contributes to the fuel for personal mileage you might be hit for tax on this as a benefit and so you should check the implications.

If you take the allowance, you will also be able to claim tax relief on the difference between the rate you are being paid per mile by your company and the government's recommended rate (I think it's currently 45p per mile). You do this through self assessment or by calling your tax office.

 

[fredmont]

You can claim some tax relief if you use your own car I think. It used to be somthing like 40p per mile for the first 10000 miles plus 25p per mile for the rest, minus what the company has given you in petrol allowance. The figure remaining is tax free.

 

[Bluemanc100]

You can claim some tax relief if you use your own car I think. It used to be somthing like 40p per mile for the first 10000 miles plus 25p per mile for the rest, minus what the company has given you in petrol allowance. The figure remaining is tax free.

2015/16 rates are I believe as follows:

1.2 Private Cars: (Mileage allowances for employees using private cars on Company business.)
First 10,000 miles per tax year (per mile) 45p per mile
Additional mileage (per mile) 25p per mile

 

[lazza]

OK, I'm digging up this old topic, because I'm hoping someone could give me some advice...

I'm in a slightly different situation to the OP, but the questions I have are kind-of related.

So, the company I work for currently provides me with a company car, on which I currently pay around £240/month in tax. However, my employer is selling the part of the company I work for to a competitor which is based in Switzerland, so I will find myself as the only UK-based employee of a Swiss company. Because of this, my new employer will not have a car-lease deal in the UK, and is offering me £350/month (after tax) as a car allowance.

The question is, am I right in thinking that I will be £590/month better off? In other words, I can assume I don't pay the £240 tax on a company car plus I get an allowance, is that right? I know that I will now have to pay for everything out of this allowance (the car, tax, insurance, maintenance, fuel) and that I then claim back business miles at the standard rate (45p) rather than paying back personal miles at the company rate as I did before (15p), but is my basic assumption correct?! The difference in car I can get between £300/month and £500/month is immense!

Secondly, there seem to be a few options for spending a car allowance.

Does anyone have any experience with a personal car lease? There seem to be several companies where you can make monthly payments on a 3-year lease for a car that includes road tax, and can even tag on a maintenance contract if you want. Is this worthwhile? It seems a good idea to my lazy-arsed side, but then the information I can find on-line seems to suggest there are a lot of catches (too many miles, high charges for paying off the contract, or maintenance only covering certain things). And, if I am arranging the lease for myself, not for a UK-registered company, is it correct that I have to pay full VAT rather than to get some of the tax back?

I realise the other option is to buy a car outright on finance (car dealer's finance or bank loan) but then I need to make all other arrangements, although obviously end up with a car at the end of it!

It's doing my head in!

 

[Chancy Termites]

With a lease, just remember that they will try anything to get more money out of you when you return it. Any tiny scratch, any damage to the inside, no matter how minor. You should budget £500 or so to put it through a body shop and full on valet, otherwise you'll be battling the leasing company for a whole lot more.

With finance you can buy a cheaper, older car and you end up with an asset at the end. Are there rules about the age or size of car you need?

Don't forget to allow for tyres, breakdown and maintenance to match the company car experience. Rental cars too to cover breakdowns.

 

[John69]

OK, I'm digging up this old topic, because I'm hoping someone could give me some advice...

I'm in a slightly different situation to the OP, but the questions I have are kind-of related.

So, the company I work for currently provides me with a company car, on which I currently pay around £240/month in tax. However, my employer is selling the part of the company I work for to a competitor which is based in Switzerland, so I will find myself as the only UK-based employee of a Swiss company. Because of this, my new employer will not have a car-lease deal in the UK, and is offering me £350/month (after tax) as a car allowance.

The question is, am I right in thinking that I will be £590/month better off? In other words, I can assume I don't pay the £240 tax on a company car plus I get an allowance, is that right? I know that I will now have to pay for everything out of this allowance (the car, tax, insurance, maintenance, fuel) and that I then claim back business miles at the standard rate (45p) rather than paying back personal miles at the company rate as I did before (15p), but is my basic assumption correct?! The difference in car I can get between £300/month and £500/month is immense!

Secondly, there seem to be a few options for spending a car allowance.

Does anyone have any experience with a personal car lease? There seem to be several companies where you can make monthly payments on a 3-year lease for a car that includes road tax, and can even tag on a maintenance contract if you want. Is this worthwhile? It seems a good idea to my lazy-arsed side, but then the information I can find on-line seems to suggest there are a lot of catches (too many miles, high charges for paying off the contract, or maintenance only covering certain things). And, if I am arranging the lease for myself, not for a UK-registered company, is it correct that I have to pay full VAT rather than to get some of the tax back?

I realise the other option is to buy a car outright on finance (car dealer's finance or bank loan) but then I need to make all other arrangements, although obviously end up with a car at the end of it!

It's doing my head in!

If the car allowance is £350 after tax (car allowances are taxed as salary) then, yes, your break even point is £590 a month to cover the costs

 

[1961_vintage]

And, if I am arranging the lease for myself, not for a UK-registered company, is it correct that I have to pay full VAT rather than to get some of the tax back?

Yes it's correct.

Also, you hear a lot of stories about punitive excess mileage charges, early termination costs and unfair wear and tear penalties etc - but these will be clearly laid out in your lease agreement - you just need to check the detail and negotiate on any points you think could put you at risk, eg build some contingency into your estimates for annual mileage. Bear in mind the lease company are hedging on the residual value of the car when you take it back and the benefit to you is that they rather than you carry that risk. With the amount you have to play with you should be able to get something decent and I would be tempted to get it fully loaded with accident management with full service maintenance and repair - you should benefit from their volume buying power.

Everyone's circumstances are different but for me I find the certainty of cost, management of risk and overall convenience worth it.

 

[lazza]

Thanks. It's a bit clearer now! Just need to make a decision what to get, now. Quite fancy the jag XF, but it feels a bit unreal that I could afford one!

 

[Chancy Termites]

Get the fastest car you can afford.