Company car or take the allowance ?

anybody had experience of this before can offer any advice ? I have a car as my job ( area production manager) means travelling between 5 sites and head office. Firm has decided to give us the option of a (taxed) allowance or stick with (heavily taxed) company car option. I’m trying to work out if its best to stay with the company car, get hammered for tax but have hassle free motoring and a new car every 3 years, or take the allowance and buy a car I’d want ( but stand cost of insurance, wear and tear, servucing etc) but at least after I’d paid it off I’ve summat to show for it. Anyone else been in this position and if so what would you advise ? Any help appreciated its doing my head in.

 

Allowance. if you want a new car, get a personal lease over a couple of years and you'll probably have a decent profit compared with the allowance youre paid after tax.

I've tended to find the tax on a company car is pretty excessive compared to the value of what you get. I also find if its your car, if youre doing decent mileage, you can make a good return on mileage, if a company car, you don't get the same benefit and get taxed on the benefit in kind as well

There are a few accountants on here so they'll give a more accurate idea, just personal I've always paid personally and then got mileage reimbursed and the "bonus" to allow a vehicle to be acquired and then leased over 3 years.

 

IIRC If your company pays the reduced rate of expenses (~10-12p per mile) when you get a car allowance, then if it is your own car you can claim the full rate (~40p/m) back on your self-assessment up to the first 10,000 miles.

 

Any excuse to post this mad website... https://www.lingscars.com/

 

Bloody hell, not seen that in a while. Good to know she's still going!

 

Its 45p isn't it?

 

Always financially better to have allowance but from a simplicity perspective company car means you don’t have to worry about upkeep and service.

 

When I worked, at first, I had the choice of either option. I could either fund my own car and pay for
any new tyres, tax, insurance, repairs/wear and tear and claim for any fuel used on official calls at
what was described as Casual user rate. I could afford a vehicle around £15k in value with all my other
commitments. The other option was to take a Leased car which was fully funded. I could use it for private
mileage and could nominate two family members as other users driving with my permission. My fuel costs
were refunded at what was termed Essential users rate, which was considerably lower than the Casual user
rate. I opted to go with the Leased car option and every three years got a brand new car. At my grade I could
choose any vehicle up to £27k and my last car was a Mondeo Titanium X. Some of our lads were doing upwards
of 2,000 miles per month on Casual and one was overheard in the Canteen telling someone, that from the proceeds
from his fuel costs, he was paying his mortgage. Not long after that, they scrapped the Casual option. You either
had a lease car, or if you had a call when a lease car holder ( around fifty on the fleet) was in the office, you
borrowed that for the day and the leaseholder claimed the mileage. In principle, the system worked well, but there
were instances where some of the younger users were " flooring" it, which meant you couldn't cover the costs and
there were cases where damage was done. As the excess was £100 that didn't go down well, if the user denied
that they had incurred the damage. In the end, to avoid any hassle we had several pool cars that people could use.
I would opt for the Leased route every time. O. K you are taxed, but you get a brand new motor every three years
and basically you just have to get in and drive it, knowing that absolutely "everything" is covered.

 

I thought the rate depends on your fuel type and engine size - or at least the company car rates does. The company car advisory rate varies from 11p-21p/m for petrol, 7-13p/m for lpg and 10-13p/m for diesel.

 

So most folk would err on the side of taking the allowance, I must say thats what I’ve thought to do, at least then you've something to show for the outgoings from your salary, some are staying in though as they like the security of a no hassle car, lease and pcp dont work for me as I do 20k miles a year and they want to set me a low mileage with a charge per mile over and above. Ta for the input I think I’ve made my mind up

 

Allowance, although there used to be some tax relief on plug in hybrids... the outlander became popular due to this.....

 

Some good advice and useful information in this thread. I will have the same decision to make in a couple of months so I will return to this when making my decision.

 

I used to have a company car years ago when the tax rates were based on how many miles you did, the more miles the cheaper the tax rate as it was seen as an essential tool of the job. The rate was higher when you did few miles because it was seen as a perk.

Then Gordon Brown changed it in 2000 so it became based on emissions and its been the same since. At the time our company offered a choice to come out of the company car scheme and take the allowance and virtually everyone took the offer. It was much more clear cut then because they were offering 40p per mile and fuel back then was 72p per litre. Everyone was miles better off on the allowance. Nowadays I am not sure the numbers are so clear cut when the mileage rates are 45p per mile but fuel has doubled and cars are 10k more expensive than they were then, but I find it rare for companies now to offer company cars. Most just offer the allowance. At my last place they paid way more than normal in the allowance but then only paid 16ppm for the mileage. When fuel hit 1.50 a litre a few years ago what they were paying in mileage was barely covering the fuel until I factored in the tax expense claim on my tax return.

It is hard to advise on your case specifically without knowing details like

a. How much are you being offered as a taxable monthly allowance?

b. What does your co pay in mileage rates?.

c. How many miles do you do?

d. Are you a standard or higher rate tax payer?. If you pay tax at the standard rate then it could make the company car more attractive as your tax bill for the car is half what it would be if you pay tax at the higher rate.

e. What company car are you given and what is its BIK percentage and cost?

Bear in mind that if your co pay less than the HMRC advisory rates (45p first 10k miles and 25p thereafter) then you can claim the difference as a business expense on your tax return. This doesn't mean you get back to the full rate because HMRC are paying the difference, it just means you get 20% or 40% of it back, depending on your tax rate, because the difference (i.e. the business expense) is added to your personal allowance.

You need to decide if you are going for a lease or similar deal where you have a known cost, or failing that, work out what it will cost you to pay a loan, the fuel, tyres etc. Stick it all on a spreadsheet.

Then work out what you expect to receive - i.e. 12 monthly allowances, less tax, plus the mileage claims values for your expected mileage, plus the reclaim of tax if they pay under the limits.

If the difference, as an overall cost to you, is more than you pay in tax for your company car then in theory you are better off with the company car. But you then need to factor in whether the difference is worth it to have the car you actually want rather than one given to you.

 

Just as a follow up, if you need to claim back a difference in mileage claims as a expense because your company doesn't pay the HMRC rates then you don't need to do a self assessment just for this purpose if you otherwise don't need to do one. You can just download and fill in a form P87 and send that off.

 

You could always consider buying your company car at the end of its lease - making sure that the car is fully serviced with new tyres and all its faults sorted just before the end of the lease. Then take the allowance.
Personally I prefer the company car option.

 

When I had a company car, I looked into going for the allowance, I found that generally if you went for leasing with a built in maintenance package it would actually cost me slightly more than a company car.
The only way I could make it pay was if I either went for a lesser car than I was driving or if I took the non maintenance package and hoped very little went wrong.

 

Leasing a car and taking the allowance is the worst idea ever.

The major benefit of car allowance is you will own the car at the end of the finance agreement, or a certain degree of equity at least.

All company cars are leased anyway, and companies get far bigger discounts than a customer would as they lease in bulk.

You are basically pissing money away taking an allowance and leasing.