The time is approaching when I have to decide to go the company car route or cash option route.
Cash option
Income
1 Cash total £6750 p.a. gross = £3982pa (less 41% tax)
2 Add saving from no P11D eg £111 per month (BMW 320d)= £1332pa
3 At 30000 miles p.a (10,000 business) tax allowances £4,000pa
Total = £9314 or £776 per month
Expenditure
1 £20,000 financed over 5 years = 4668pa
2 Depreciation pa. aprox 20% (not scientific) £4,000
3 Servicing etc £800pa (estimate)
4 Insurance £400
5 Tax £160(?)
Total = £10028 or £835 per month
Car option
1 Choice of sensible motor either new or up to 1 year old £22,000 purchase price
2 0.22p per mile, no tax, insurance etc to worry about
3 Tax liability £111 per month (@40%)
Are these figures correct and is this a no brainer car option?
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Under the cash option, I think you've incorrectly included the capital cost twice. You've got 4668 per year to pay off the car (capital + interest), plus 4000 per year depreciation. You should either not include the capital repayment and include the depreciation, or not include the depreciation.
The way I'd calculate it would be approx £1400 per year in interest (20000 at 7%) + 4000 in depreciation = £5400 (rather than the £8668 you have). Actually this overstates the interest because you only pay interest on the whole £20000 at the start. Also if you go the cash route in later years you'll spend less on financing (because you'll be trading in the old car). So in the longer run, you'll be looking at maybe £1000 per year in finance (assuming average of £14000 owed at 7% interest).
I realise I'm not being particular clear, but if you want to be sure that you're wrong, consider that under your figures a £20k car will cost you £50k over five years - makes no sense.
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Thanks for this, makes the cash option route look more realistic. Think I will do a spreadsheet.
One other option is to buy a cheaper car, used for example.
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Suggest you should take deprciation out of the "Expenditure column, instead you should have "future retained value" as a plus, i.e. the residule value of the car you have bought at the end of the finance period.
Expenditure
1 £20,000 financed over 5 years = 4668pa
2 Servicing etc £800pa (estimate)
3 Insurance £400
4 Tax £160(?)
Sub total = £10028
Residual value = £5000 (?) over five years / £1000 p/a
Total £9028
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Sorry ....
Expenditure
1 £20,000 financed over 5 years = 4668pa
2 Servicing etc £800pa (estimate)
3 Insurance £400
4 Tax £160(?)
Sub total = £6028
Residual value = £5000 (?) over five years / £1000 p/a
Total £5028
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Under Cash Option, you list cash total and take into account tax but then for the 10,000 business miles you seem to ignore the fact that you claim back the tax on what you can claim back.
I'm not totally upto speed on this but I think you claim back the tax on what the Inland Renenue allows per mile. For your mileage it's 40p/mile so is £4000 and then you get the 40% back on this. Think you're over inflating this value.
Reason why I know it must be wrong... colleague drives a Merc E320CDi as his own car and does well over 25k miles per annum and gets about £2500 back.
Think you need to recalculate the money you'll have coming in.
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I'm not totally upto speed on this but I think you claim back the tax on what the Inland Renenue allows per mile. For your mileage it's 40p/mile so is £4000 and then you get the 40% back on this.
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Reckon he can't claim tax back on his mileage if he is given a contribution towards the cost of the car by his employer
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No. :-)
Try using an online calculator such as www.cashorcar.co.uk
PS The quoted mileage rate of 22p a mile for fuel in a company car is well in excess of the IR's 'Indicative Rate' and could give rise to a tax liability.
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Re "Reckon he can't claim tax back on his mileage if he is given a contribution towards the cost of the car by his employer" yes you can
for example if
Cash in leui of car is taxed as extra income, then there is no reasons why you cannot claim the milage allowance from revenue where this is bigger than any expenses you may be paid for mileage
it usually comes down to the price you can get insurance for, and what risks u need to take, for instance if you need to drive round brixton all day for work probably company car makes sense
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Thanks for the website will look it up, also had missed the tax liability issue.
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