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Hi all.
Been offered a role that comes with a car but have absolutely no experience with company cars and how they work.
In simple terms.... Will it cost me more to have a company car financially?
Can someone explain how it all works please.
Many thanks.
https://comcar.co.uk/ has a calculator.
If you can make an EV work for you it can be very cheap (benefit in kind tax is very low). If you can't - the cheaper and lower CO2 the better.
Assuming you're comparing to doing commuting and business miles in your own car (and getting a car allowance / mileage) for me it mostly came down to insurance. If you have loads of NCB, clean licence, live somewhere low risk etc you're probably better off in your own car. If you also want something posher or higher CO2 it'll push you that way too.
Does vary enormously on how the package is structured which affects the benefit in kind.
Eg You can get the use of a company car, which is the least tax efficient or they can sell you* the car, lending you the money to buy it in which case you then can claim mileage allowance on work miles as it's your car. If you do a lot of work miles you can get 1000s back in tax from the mileage which makes a big difference to the overall tax rate - you have a perverse incentive to maximise work miles....
* Not 100% sure exactly how this works, but my Wife's scheme changed to it and her tax bill plummeted due to the change. AIUI you pay tax on the loan the company gives you to buy the car.
Nostalgia mode
1. Dad comes home with a list of cars printed on that perforated paper with holes at the side. It usually features high-end Astras and mid-range Cavaliers and Sierras and maybe even a Passat
2. We all pile down to the motor show at the NEC to have a crawl around and get some swag
3. We (he) chooses
4. Mum picks the colour but not the same one as the outgoing car
5. Dad brings the new car home and we're all excited for the new car seaty-smell and the delights of a novelty like maybe a sunroof, electric (front) windows or a tape player.
Cheers.
I believe the car is going to be a base model VW Golf. Potentially diesel or maybe hybrid
It's going to be a lot of driving so would rather put the miles onto their car rather than mine.
I would be able to use the car for personal use too.
I've got a mate saying it could cost me around an extra £500 a month in tax !!!
@renton, it won't be £500 a month for a basic golf. The golfs on our list cost high rate tax payers around £260/mth.
The comcar link above will tell you what you will pay. you can put your salary into the calculator to get a more accurate figure.
edit: should have said, they have Golf 8 2.0TDI R Line manual
Being taxed on £500 and paying £500 in tax are two very different propositions.
It’s going to be a lot of driving so would rather put the miles onto their car rather than mine.
whats your current car / what would you buy privately?
Your first 10000 miles a year are at 45p per mile - for my car, thats 12-13p of diesel, 2-3p in tyres, 30p profit.
Everything else, apart from about £10 more in insurance per year, is a cost I would have anyway as I need the/a car for my personal life.
I am desperately trying to justify getting an EV, but struggling.
Current car is a petrol Octavia VRS 16 plate that I've had from new. 51k on the clock and does about 34mpg
Cost you more than what?
Company car tax take is on an escalator from government. If you are a standard rate tax payer, something like an octavia/ golf will cost you circa £1400 -£1600 this year, so about 110-120 a month and more in the years to come.
This varies depending on the BIK value of the vehicle ofcourse. You either pay additional tax on top for a fuel card as further BIK, or claim back your fuel costs at something like 12ppm for business mileage.
You don't pay company car tax at all the if you use your own car for work and can claim up to 45ppm for the first 10,000 miles and then 25ppm thereafter, so its therefore tax efficient for you and the business. Most companies insist on the car being under a certain age and fit for purpose but it really depends on the company policy.
Theres a balance to be calculated here and any number of ways to make it work.
I have my car on a full maintenance rental that my mileage claim back mostly pays for, and my company provides me with a car allowance to make up the shortfall to my break even point.
Simple guide to company cars please.
Drive it like you stole it.
I am now on my second company lease plug in hybrid (phev). Considerably lower company car tax (BIK). I plug it in every day so am getting 20 plus miles a day of electric travel which also saves money. Lease deals really good and enables use of a much posher car than I would otherwise be able to afford. My Volvo XC40 phev costs similar per month to a regular Octavia or Superb and less than a Passat.
Nostalgia mode
1. Dad comes home with a list of cars printed on that perforated paper with holes at the side. It usually features high-end Astras and mid-range Cavaliers and Sierras and maybe even a Passat
2. We all pile down to the motor show at the NEC to have a crawl around and get some swag
3. We (he) chooses
4. Mum picks the colour but not the same one as the outgoing car
5. Dad brings the new car home and we’re all excited for the new car seaty-smell and the delights of a novelty like maybe a sunroof, electric (front) windows or a tape player
Are you me/my brother?!?!
Happy days they were, the excitement when a new car turned up was awesome. Happy days.
For me it is considerably cheaper to have my company car.
For less than the monthly pcp of a medium hatchback I have a fully loaded bmw 330e with no running costs.
For me it is considerably cheaper to have my company car.
For less than the monthly pcp of a medium hatchback I have a fully loaded bmw 330e with no running costs
How come that works out like that mate.
It’s going to be a lot of driving
If it's a lot of miles then deffo get the company car. Any problems- they have to sort it rather than you run round trying to fix it & get interim vehicle to keep you working.
Drive it like you stole it.
+1- since I changed from company to own car, my son wonders why I don't drive so fast. Bit of a difference when you're paying for the fuel.
its worth noting that your company may provide you with a fuel card to use with the car, that they may allow you to use for personal use as well. That'd also bump up the bik you have to pay
Yes they have said I can use it for my own personal use too.
Is there a way of working that out ?
For me it has made sense. On my company scheme I can downgrade the car and get a cash top up. So I took a Skoda and the extra cash I get covers the increase in tax. Thus I get a new fully maintained car which the company pays me to have.
However going to be working from home now so car goes back in a year and I will take a full cash allowance.
Is there a way of working that out ?
On the comcar site mentioned above they have a comparator so you can input car choice, fuel benefit, business miles, work miles, car allowance if offered in lieu of car and it will help compare the tax benefit of the car vs allowance decision.
It's so complex now and so based on your particular 'needs' that only you can work out the cost vs benefit.
The ComCar link will tell you the 'cost', only you can work out the benefit.
Only advice I'd give, as someone who at one time was doing 35-40k pa is don't pinch the pennies and end up with a crap car.
Oh, and as someone who's had company cars on/off over the last +30 years, don't rely on the tax-paid staying the same through the period of having the car...
Company I work for have somehow concocted a scheme that results in me paying towards a car that is so rammed full of work equipment that I don't get any practical personal use from it.
So, to the OP, I don't believe there is a simple guide.
Company I work for have somehow concocted a scheme that results in me paying towards a car that is so rammed full of work equipment that I don’t get any practical personal use from it.
If you genuinely don't use the car at all for personal use, you don't have to pay any BIK and would just claim expenses for the amount of fuel you put in (or have a fuel card).
https://www.gov.uk/expenses-and-benefits-company-cars/whats-exempt
Do you have the option to take an allowance rather than the car? That works out far better for me.
If you genuinely don’t use the car at all for personal use, you don’t have to pay any BIK and would just claim expenses for the amount of fuel you put in (or have a fuel card).
Commuting to your 'base' is personal use.
Do you have the option to take an allowance rather than the car? That works out far better for me.
May do, doesn't mean it'll work for Renton.
Cheers for all the replies so far. Its a bit of a minefield this company car lark.
I think there is an option of mileage allowance at around 300 a month. The role is home based with lots of travel around the midlands and south of england.
Due to the annual salary and also the fact that is bumped up by my military pension Im going to be well into the 40% tax bracket so Its going to cost about 400 a month at least but that includes personal mileage too.
If I was to use use the car solely for work and not have the personal mileage would tat reduce it down?
May do, doesn’t mean it’ll work for Renton.
I didn't say it would, I said it works for me. It is an option that he may not have considered.
Out of diesel and hybrid options the tax will be far lower for the hybrid. For a higher rate tax payer Octavia and Mercedes A class hybrids are about £70 per month in tax currently. Is there a Golf equivalent at the moment? That is a lot of car for very little money. You need to add your own electricity and petrol cost to that, if you drive nicely or don't do too many private miles and plug in every day the fuel cost should be pretty close to a diesel too.
I looked at this at great length centering on the level of BIK (benefit in kind) due.
After a lot of research i went for a Skoda Octavia Estate Technology which has resulted in the lowest rate I could find apart from electric or PHEV.
With a salary up to £30K the BIK per month according to Comcar for SKODA OCTAVIA Estate New 1.0 TSI SE Technology 110PS is £97 per month.
It works for me, it rides like a 1.6 petrol, is cavernous and well appointed.
Company I work for have somehow concocted a scheme that results in me paying towards a car that is so rammed full of work equipment that I don’t get any practical personal use from it.
If you genuinely don’t use the car at all for personal use, you don’t have to pay any BIK and would just claim expenses for the amount of fuel you put in (or have a fuel card).
The company own a share of a leasing company. We get an allowance towards on of these lease cars but have to make up any shortfall (there's always a shortfall as you have to pick something big enough to carry all the equipment). We get a mileage allowance at noticeably less than half the HMRC rate. We can claim tax relief on the underpaid mileage once that's combined with the lease contribution from the company which gets you a few hundred quid back each year. Bottom line, it cost me.
As for getting to a base, like many others, home has been my base for the last 12 months and that's likely to become the norm, so all mileage is work mileage. I'm even expected to clean it on my own time at my own expense.
If your budget allows you really want to be going for a PHEV or EV to lower/minimise the BiK.
If not possible then the lower tax list price and low emissions means lower BiK.
If an allowance then you'll still pay tax on it.