As the title says - just had a job offer where in place of a provided company car there is an allowance of £5200. Never had this situation before. I'm under the impression its subject to deductions like salary, so accounting for that, insurance and maintenance costs etc I don't really see there's much left for a decent sized vehicle to do my job and more importantly transport bikes.
Looking at leases or HP doesn't fill me with much joy - so am I missing something here? what are the pros and cons of doing it this way and not just have the company lease me a vehicle for 3 years/ 30k miles ?
Any advice / experience of this much apprecated.
My company moved away from the company car scheme about 10yrs ago. Instead they give £500 per month, £6k per year which is taxable. It does mean you have more or less total freedom with your choice of car, buying used and potentially getting more for your money. I prefer it.
It depends on your mileage, if it's not a lot then it's a benefit, if a lot then you'll end up subsidizing the company
Also be careful on the mileage rates, IR standard rates are poor except for 2l plus petrol
Yes you’ll pay tax & ni on that so you’ll have to fund, fuel and maintain the car on the net figure. Bonus and overtime if at all won’t take the allowance into account.
You’ll also find most companies don’t up the limit, so you could be left with the same allowance in 10 years time.
seems I have a bit to consider then, especially as i expect to cover a fair bit of mileage being uk wide service.
I assume theres no way to claim back the vat as its essentially a private vehicle?
seems like its more in favour of the company than the employee then- even avoiding bik tax its not really a perk given the running costs
was hoping to return to a double cab transit with this move but that seems unlikely unless i go for a well used model and all of the pitfalls that may bring.
the job offer has a big increase in basic salary but offers no overtime / away stay payments (current job is 80% away and the top ups from this make the wage portion pretty close to the new job offer) - i do get company car now but the choices are limited so it seemed like a good option at first but maybe not so now.
seems like its more in favour of the company than the employee then- even avoiding bik tax its not really a perk given the running costs
Exactly this.
Shifts all the hassle and cost of fleet management off of the employer and onto individual employees
Also if you’ve got the allowance covering a finance deal, if you leave the company you’ve still got the commitment but no income. If you’re doing a lot of business miles I’d want them to bear the cost it’s more a tool of the job.
The allowance is £5.2k gross; normal deductions will apply so it's not a lot in net terms.
You '....expect to cover a fair bit of mileage being uk wide service'; mileage rates are low.
Not a good deal for you but great for employer.
In your case a vehicle appears to be a tool of the job so I'm very much with FB-ATB in saying employer should provide and expense a vehicle.
Is it a job you really want?
...also need to factor in the difference between their mileage allowance and the 45p/mile you’ll have to claim at year end through self-assessment.
You’ve need to factor in the BIK savings which can be pretty big.
I’ve opted out and taken the allowance and am better off. My previous vRS diesel was bloody expensive as a higher rate payer. Although my allowance is bobbins, I’m £540 a month better off for not having a company car. My M140i to buy, insure, maintain etc is costing less than the Skoda did (before fuel).
Most of the guys I work with who are higher rate payers have binned the company car scheme off now the BIK is to high. The only ones really staying in it are those who can make an EV work for them which are exempt from BIK as of April.
Everyone's situation is different. I’m on higher rate tax with a fully expensed car. Because I do a long commute, my BIK tax is more than offset the cost of fuel purely to commute.
All the running around for kids activities etc adds to my benefit and that’s without having to consider financing and servicing a car. I did look to moving to an allowance but it would have to have been sizeable to be worthwhile for me.
I’ve just joined a company which has given me a company car. The tax is quite considerable. I would much rather have an allowance as I own my car outright and it’s a spec I like unlike the slow manual piece of Dog S*** my company has given me. If I had a 6k annual allowance I reckon I’d be about £500 a month better off because I wouldn’t be paying the BIK and I would have the (albeit taxable) £500 a month extra income.
Mrsdts had an allowance in her old job. Worked in our benefit. We bought a car with a loan which was less to repay than the allowance, after a while she went on mat leave, so the allowance still rolls in, by which time we had paid off the loan and as it was a reliable car cost us naff all to keep running. Mat leave no 2 and we still had the same car. It was useful money during mat leave. Rule number one if you have an allowance, don’t spend it all on an expensive motor.
whilst A company car is the ultimate in don’t give a sh*t motoring, the tax is outrageous now.
I have a decent allowance of £12k a year, and my car costs about 250 a month on a PCP. We pay about 25p a mile for business use so I’m wel in the black. I think some of the other guys who don’t get as much sometimes struggle a bit if the do mega miles, but the allowance to me is a ‘perk’ rather than a necessity, I probably use my car for work 3 or 4 times a month at the most now.
Bear in mind your employer pension contributions don’t take it into account either - they are net of benefits.
you’ll have to fund, fuel and maintain the car on the net figure
That's not true. You buy the car with that, you run it on the mileage allowance.
I used to run mine quite healthily on the IR mileage rates - 45p and 25p. Over 30,000 miles that's £9500 tax free. That's a lot of fuel and tyres. My current employer gives a flat 25p/mile which isn't the best, but you can claim back the tax on the difference between that and what HMRC accept, so £2000
If they are offering straight fuel allowance that's pants, tell them to stick it.
Further consideration is your employer will (almost certainly) expect you insure vehicle for business use.
That combined with estimated annual usage(if you're honest) will get you a big fat premium.
Would love to be able to take an allowance as it allows a greater range of cars but as a high mileage driver I’m not allowed and must have a company car.
By “down grading” to the Skoda I’ve got I get cash back each month which covers the tax. Mileage is dealt with separately and I pay my private miles so avoid the tax hit there.
My company covers the insurance on all cars (cash takers and company cars).
That’s not true. You buy the car with that, you run it on the mileage allowance.
Not in my case, I rarely do business miles. As I said everybody’s situation will differ so there is no single answer.
If I had a shorter commute I’d consider an allowance.
How do the salary sacrifice to lease schemes work?
I’d assumed there was something around the BIK bill being lower than the tax and NI you’d pay?
your employer will (almost certainly) expect you insure vehicle for business use.
That combined with estimated annual usage(if you’re honest) will get you a big fat premium.
Again, over dramatic. You need to be insured for business use. Many insurers include it for free. The difference between 10,000 miles and 30,000 miles in premium terms for me was £20.
Big and fat indeed.
Not in my case, I rarely do business miles.
Then your running costs will be negligible
I get £500 a month allowance within my wages and 45ppm for the first 10k. I borrowed £12k for a yeti with 12k miles on it and pay £250pm for the car loan. Works for me just fine.
We get a car allowance on the presumption that the employee will have a car available for business use. In reality they do not check. I don’t need a a car for work. So the extra income is welcome. I run an 11yo CRV for bike duties.
Some companies require you to have a car of a certain age (<3yrs) and status. This is normally for client visits. I don’t have that issue.
Buy used and pay for a personal loan. That’s what I did. I used to have lease cars from the company but they stopped this for non sales employees. Then they went to VAG cars.
Used to have this. The allowance is just extra salary, then a per-mile payment on top that's slightly more than cost of fuel.
It can work OK depending on what restrictions they place on the car you have - ours used to be OK, under 7 years old, 4+ doors (not that I ever needed to carry anyone else). Some have upper mileage limits, and one construction firm I did some work for had upper CO2 limits too.
If you were happy to get something 4-5 years old, run for a couple of years then change it could work out OK cost-wise. Or actually something basic but new/nearly new and run for the full 7 years would work out OK too. It certainly wasn't enough to just get something fast/premium new every 3 years, although some people chose to do that with the money and just top up a bit themselves.
In your case a vehicle appears to be a tool of the job so I’m very much with FB-ATB in saying employer should provide and expense a vehicle.
I get that logic - BUT - the OP is hoping to get a crew cab van for transporting bikes, and doing c.30k miles pa.
If the employer has no need to move more than 2 people at a time why would they fund a crew cab; has no need to move big kit why would they fund the higher cost and bigger running costs of something transit sized?
If an employer does provide a vehicle completely free then any personal mileage is chargeable/taxable. It’s worth looking at the complete picture before - you may still be better off having one subsidised vehicle for all purposes than a van + company vehicle.
Having an allowance means getting to pick whatever damn car you please ratheer than getting stuck with whatever some arsehole fleet manager decides to lump you with.
I have had loads of different company cars and the quailty has been widely variable but in the main vastly unsuitable for my lifestyle.
I don't know anyone who has a 7 seater company car for example.
It also means that you can leave your job and not be without a car in the interim.
I've seen a few people do the walk of shame after having their car keys taken away from them as they get bagged. That'll never happen to me.
I don’t know anyone who has a 7 seater company car for example.
I've had several - Espaces, Galaxys
A colleague has an Alhambra, another has a Grand Scenic.
You need a better fleet manager
a better fleet manager
A contradiction in terms for the most part.
It's a symptom of working in an industry with extremely high employment mobility. Most construction companies won't commit to buying or leasing an "unusual" car for someone who , in all likelihood, will have moved on in 2 years time leaving them with the problem of trying to place that car with the new guy.
It's pretty much Mondeos / Insignias as far as the eye can see for the company car-ists.
Going back to the OP - does the company pay any contribution to business miles? I would expect them to do so if you are doing miles for the company and then, as others have said, you will be able to claim the difference back at the end of the tax year. The car allowance is just an extra £5200 on your salary and will be subject to tax and NI. However, that's it. No additional tax or BiK. Yes, there's an element of you subsidising the company but it probably evens out a lot more over a year once you factor in the tax recovery. Plus you have a vehicle that is your own so, lose the job but keep transport. I get an allowance through my job (well, used to have the car, but a back of the fag packet calculation showed a bigger benefit to me in taking the allowance so I swapped) and the secret is being sensible in your choice of car. I make sure my car loan is within the monthly allowance including a contribution towards tax, servicing and insurance, and effectively I am being bought a car by my employer. What's not to like? Sure, I don't drive around in anything s****y or exotic but that's my choice to be Mr Boring and Sensible. Sure, I could go and get something much "nicer" but I don't want to spend my money in that way. 🙂
The allowance is just extra salary
If you check your employer's pension contributions, you'll find that it's not.
Ditto if you claim overtime or have any sort of bonus (or indeed anything else) that is calculated as a percentage of salary.
Oh, and redundancy pay.
Not sure on the dates when BIK started biting but certainly the idea that a company car gives you a free car to use as your own disappeared a long time ago. I remember early in my career it was just that. I then moved away from that option when given the allowance choice as that plus mileage payments on a second hand passat that ran reliably for ever (170k) was a nice additional income even.
These days cars cost you money no matter what approach. If you want anything specific personal choice-wise, expensive list price and/or emits large CO2 the best bet is personal allowance. In that case you pay the income tax and think of it as yours in terms of tyre/repair/service costs.
If you're happy with the company offerings, the BIK (driven by list/CO2) is palatable and you like the idea of no hassle if it's fully expensed then go that route.
The outlier is EVs with their 0-3% BIK over the next three years. That would save a lot of money for the recipient of the car but it depends if it's on offer and fits with that worker's use. I would imagine that lease deals on these are at a large premium compared to the stock of petrol/diesel cars currently available.
The outlier is EVs with their 0-3% BIK over the next three years. That would save a lot of money for the recipient of the car but it depends if it’s on offer and fits with that worker’s use.
I'm currently considering coming off the car allowance as we have just had BEVs introduced to the company car list. The Hyundai Ioniq that is within my grade has a range of 190 miles, which would suit me fine for my 18 mile (each way) commute. It's only the fear of the unknown putting me off at the moment.
This is an interesting post for me as I'm chopping my company car in later in the year. Doing the sums like-for-like with what I have now at 25000 miles a year (split evenly between business and personal) including tax, tyres, insurance, servicing and work fuel it would leave me £40 a month better with a car allowance, assuming a lease of £500/month and the same in pre tax allowance. You really need to stick the numbers in a spreadsheet and see if the figures work for you, and be honest about what you'll get, all the running costs etc.
Our vehicle list is weird and changes regularly but I got the car I wanted last time. I'd like an EV or PHEV this time but I'm not sure if that'll be allowed (12-16% BIK is enticing!). The other fly in the ointment for me is that I've already been told that there is no option to take a car allowance: it's lease vehicle only...
comcar.co.uk will give you an indication of the BIK tax for any vehicle and has a tab for comparing the car vs cash impact
This site is also handy for working out the net cash effect for any allowance:
