You don't need to be an 'investor' to invest in Singletrack: 6 days left: 95% of target - Find out more
Possibly a daft question. I have a monthly £600 car allowance but have the option of getting a company car, or possibly salary sacrifice.
We're a small company, not a mega corp, so no huge experience or a fleet manager to support.
I will get an EV.
Is it fair to assume that I can directly translate my £600 allowance to a company car cost to the company of £600 (excluding VAT)?
For example; I've seen the Tesla Y available for circa £540 (ex.VAT) per month so this could fit the bill nicely.
Or rather I should translate my £600 allowance as £600 inc. VAT for a lease deal?
I guess my question is does VAT influence what my company car allowance could be?
Thanks.
you'll need to check the taxable rates for the car you want,
https://comcar.co.uk/company-car-tax/Tesla/Model%20Y/
click on the 3 options
ie RWD auto
https://comcar.co.uk/companycar/tax/calculation/?vehicle_id=0000197067
this will give you the BIK, tax payable, and theirs an income calculator.
a £600 cash allowance is taxable at regular income tax rates , a company car allowance you'll pay tax on BIK, so will reduce your current salary, you'll need to negotiate your salary to ensure you arent losing out..
I thought the salary sacrifice schemes for EV company cars were founded on the fact that there is no BIK tax on them?
only 2%, £15 a month on £45k model, so alot cheaper than other cars.
Your car allowance will be taxed at 20/40%
Company car then BIK at whatever rate - EV's are now liable for BIK, rising year on year
*edit WYDS already said that....
I wouldn't assume anything, I'd check with whoever manages the scheme at your company. Back when I still had the choice, the maximum company car monthly lease cost and the alternative cash allowance option were wildly different figures.
So your offered cash or car?
You will get taxed based on whatever gives the HMRC more!
From 6 April 2017 the rules changed for drivers who have the choice of a company car or a cash alternative. Previously, drivers who had this choice and chose to take a company car were taxed on the Benefit in Kind (BiK) value of their car.
Drivers are now taxed either on the BiK value of their car or on the value of their cash alternative, whichever is higher.
But check your policy.
Thanks for the responses, let’s ignore salary sacrifice or what my personal tax / BIK consequences are.
I’m trying to establish if there’s a standard pattern between an allowance and a company car lease cost.
Cougar got it. But we don’t have a scheme manager, it’ll be between me and the md to decide, I’m just not looking to take the p!ss. Right now I cost the company £600 cash per month, should the equivalent company car allowance be £600 ex or inclusive of VAT?
Car allowance costs the company £680 including employers NI
Company car will have an insurance cost for the company to bear but this could be very high depending on claims history etc. but it would be fair to consider this cost. I would then take the lease cost plus 50% vat as the company can only reclaim 50% if it is used for private use.
I.e.
Insurance £80 per month
Car excluding vat £500 + 50% VAT = £550
Total cost £630
Obviously work with the employer on this it would be seen as unfair if you could get a much better car than someone else just because you had a contract for 5,000 miles per year but they needed 30,000 miles to cover business use. Politics and many other aspects come in to play.
Aha! That’s exactly what I’m looking for! Thanks jp.
I’ll get number crunching.
it’ll be between me and the md to decide, I’m just not looking to take the p!ss.
But that's their decision, surely? You can't take more than you're offered. What you 'cost the company' is irrelevant unless you're a shareholder or something. No?
To put some figures on my post above: My car allowance is something like £300/month (it might even be £250, I'd have to check). When I still had access to the company car scheme, the top-end leases available to me were coming in at £450+.
How any of that came out in terms of tax, BIK, salary sacrifice or what have you I have no idea. (Similarly I don't know what is considered 'normal,' prior employers' policy has always been "you'll have what you're given.") I don't have a brain for that sort of thing, I took the car over the cash simply because it was fully managed hassle-free motoring. The engine falls out tomorrow, they can take it back and send me another one.
... which is a point, actually. If you do go for the car, check the fine print as to what happens if you quit or get sacked six months into a three year lease.
Theres no point trying to establish any standard pattern, it has no relevance to you. The 2 will be wildly different at most places with a hr dept. If its between you and the manager then you just look at all the costings etc together and work out what suits best. I would say a £600 car allowance would translate to a £300/350+ vat a month company car to be cost neutral given you are transferring all the problems, liabilities, costs etc back to the company. There is a reason car allowance payments have become more common.
Bear in mind with a ev there are a load of other cost factors that come into play. If you purchase a vehicle then there are very good capital allowances, but then you cant reclaim the vat, if you lease you can reclaim half vat, so on so forth.
My last lease was £330 a month plus vat, i would have needed £600 a month company car allowance to be cost neutral on the lease, insurance and maintenance. Translating a £600 a month car allowance to £600 a month even including vat would be a big increase in effective pay - assuming of course its also a personal vehicle.
So your offered cash or car?
You will get taxed based on whatever gives the HMRC more!
From 6 April 2017 the rules changed for drivers who have the choice of a company car or a cash alternative. Previously, drivers who had this choice and chose to take a company car were taxed on the Benefit in Kind (BiK) value of their car.
Drivers are now taxed either on the BiK value of their car or on the value of their cash alternative, whichever is higher.
This does not apply if you have an EV as a company car. You only pay BIK, currently 2%, until 2025. From 2025 it will increase by 1% each year until 2028. So 2028 will be 5% BIK for EVs assuming nothing changes in the interim.
Other thing to consider, car allowance isn’t factored in for pension, pay rise or bonus.
How many companies regularly review the car allowance and uplift it, but lease cost will automatically increase.
When I’ve had the option, I’ve always gone for the car, as the miles I was doing just to commute plus personal use meant the fuel saving more than offset the BIK.
If I had taken the allowance, the net funds would have been pretty low to cover buying, servicing and fuelling a car doing c30,000 miles a year.
I’m now doing a 50 mile round trip to work once or twice a week. Quite happy to have my own 15 year old car for that.
The company car rates available to you as an employee are likely to be higher than straight lease costs to cover maintenance, insurance, etc. At our place it's typically £100 a month more than headline lease rates