I am disillusioned in my current job, been for an interview for a job that has better hours but £6k less pay. However it comes with a company car, either a Focus or Astra.
Now I have never had a company car so unsure of rules so if anyone has any links, info etc then I would appreciate it. I asked at the interview what the company "rules" were on the car and was told that all business mileage is covered and you would pay for any private mileage, but he didn't say what the payment was.
I am thinking, ok, £6k less, but Gordon Brown would take £1.5k of that anyway. It probably costs me about £1k on fuel to get to work so as a gross amount, say rough £1.25k on my salary. That doesn't include wear and tear, servicing, ins etc.
But I am totally ignorant to how much it would "cost" me to have a company car. Is there a standard cost per mile for personal use? Does "creative bookeeping" restrict personal miles?
Any info gratefully received, I am off to work now but will try and search the forum whenever I can to see if there are any similar threads.
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Any info gratefully received
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see hj's faq on the left. (faq no.6)
also try www.hmrc.gov.uk/payetaxpayers/tmacompany-cars.shtml
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Lots of variables here.
You pay tax on a percentage of the car's list price, the percentage being defined by the car's CO2 emissions.
For example, a Ford Mondeo 1.8 LX 5 Dr emits 187g/km, which puts it in the 22% tax band. This means you pay tax on 22% of its £14,465.00 list price (or £3182.30). The way this would normally work is that the £3182.30 gets knocked off your tax free amount (your tax code).
The actual bottom line amount of tax you pay depends which income tax bracket you fall into. Worst case on the Mondeo above is just under £1300 a year (or £106 per month) if you hit the 40% tax bracket. Best case will be £700 (£53 per month) at 22%. You would struggle to finance, insure, tax and maintain the same car for a quarter of that.
The best option is a Euro IV compliant diesel of 2.0 litres or less. This will typically be taxed at comfortably less than 20%, even with the 3% diesel surcharge added on.
If you have to pay for your private mileage, you won't get taxed on any fuel card they give you. Bear in mind though that commuting is counted for tax purposes as private mileage. If your commuting fuel is paid for, or the mileage rate that you pay back to the company for your private fuel at is considered too low, that is classed as a taxable benefit. I was paying 9p per mile this time last year.
Hope this helps
DP
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This can get pretty complicated and there?s no right and wrong answer to whether it?s a good idea to have a company car or not.
Basically you pay income tax at your normal rate (sounds like yours is 22%) on the P11D (should be the list price) value of the car at a percentage that varies with the cars CO2 emissions value.
So if the car cost £15000 and it fell in the 18% band for CO2 , then your tax liability is £15K / 18% = £2700. Divide that by 22% and you get £594 (£49.50/mth).
If you repay the cost of all private fuel, then you have no fuel benefit liability. Note that if you?re office based, travel from home to your office is private mileage so you would have to repay that. If you normally work from home then you can claim the odd trip to office as business mileage.
HMRC (Inland Revenue) has approved rates for fuel cost repayment ? they keep changing as fuel prices rise:
www.hmrc.gov.uk/cars/advisory_fuel_current.htm
so as long as you repay these rates (note these are the minimum HMRC will accept, your firm might charge you more) then there would be no fuel benefit liability.
Have a look at www.cashorcar.com and play around with the numbers ? if you assume that your £6000 loss in salary is the ?cost? of having a company car then that might give you a feel for it. Bear in mind that, in my opinion, there?s huge peace of mind in having a company car ? if anything happens to it, or goes wrong with it, then someone else picks up the bill. I reckon this peace of mind is worth at least £100/mth.
Against that, you may not get much of a choice (if any) of car. Don?t be surprised if you turn up on the first day and get someone?s cast off car (not always a bad thing, unless it?s ages before it?s due to be changed). If you?re at all interested in cars then you?ll always wish you could have the Zetec instead of the LX, or the bigger alloys etc, so it can be frustrating.
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Its all been said, and covered admirably. Dont forget the benefit is on the LIST price of the car, so thats a pita as no-one pays list for a car.
Real benefits of a company car are
accident? no bother, hire car turns up next day. (or as soon as you get out of hospital)
car breaks down on motorway? no problem your car comes with full aa style cover.
Insurance? no bother
Tax? no bother
MOT? whats that?
You pay for agro free driving.,
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TourVanMan TM < Ex RF >
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You will probably find that when they say you pay for private mileage it's the cost of petrol for personal use. But see below for the extra tax you will pay.
Our company scheme for example has a classification for business need and benefit drivers. A benefit driver has a fuel card but must pay back the company for private miles at whatever pence per mile. Benefit drivers depending on grade may have a fuel card which covers all fuel (but you pay tax on this benefit). I have a benefit car but no fuel card so claim money for business mileage (about 14.5ppm at present I think) and pay for my own diesel.
But it will not only be the cost of petrol you will pay because with the benefit of a company vehicle for private use you will pay tax on this benefit. This is based on the book price of the car when new, the CO2 emissions, whether it is diesel or not and what tax bracket you fall in.
So for example, take a Ford Focus 1.6 Ghia 5 door hatch:
- List price £15170
- CO2 emissions 161g/km
- 40% tax payer
So to work out extra tax lookup the P11D %age value for 161g/km (rounded down to 160) which this year and last was 19% and calculate:
List price x P11D value x 40% = 15170 x 19% x 40% = £1152.92 pa
So every month you will be paying out £96.08 for having this benefit, i.e. company car. if it was a diesel registered after 1st January 2006 then there's a surcharge for diesels of 3% to add to the P11D %age value. If diesel registered before 31/12/2005 then there no surcharge if the diesel car is Euro IV.
Depending on your company this amount will either be decucted at source or via your tax code.
Rob
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I pay the cost of private milage and the way it works is that I pay evertime I fill the tank and claim 12.5p/mile for every business mile I drive (2204cc Diesel and the 4 is important as the 12.5p applies to diesels above 2200!) - they will tell you how they work it and what the rates are if you give them a call.
You should note that if a business trip starts from home (and does not involve stopping at the office on the way) most regard the whole part of the trip as business miles (including the tax man).
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You should note that if a business trip starts from home (and does not involve stopping at the office on the way) most regard the whole part of the trip as business miles (including the tax man).
You are allowed (by the tax man) to call in at the office on the way, for instance to collect some papers, and still claim the whole trip.
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Thansk for all your replies guys, just in from work and back out again at 6am! Wonder why I want out of retail???
I will get a more detailed look at your examples and the links that have been posted but already there is a lot of food for thought. And yes, I am basic rate tax payer so get jealous of any 40% tax payers problems!!
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So for my Focus example that's 15170 x 19% x 22% / 12 = £52.84 per month. Not bad for a fully financed new or almost new car in my opinion. It is when you're on 40% tax people think own car plus allowance better... me ... I've benefitted a few times from a company car, e.g.
- Golf GTI 1.8T stolen and had an Audi A4 1.8 SE, Audi A4 1.8T Sport and a VW Passat 1.8T sport as company courtesy cars... total time without Golf until new car arrived was about 4 months. Got tax back on paying for Golf too...
- My next car, Passat 1.8T Sport in an accident (about £3k damage to front) and hire cars until fixed. Managed to end up with an Alfa Romeo 156 2.0TS for about two months.
- Current car Mondeo broke down and got recovered to home, hire car sorted late at night, taxi to collect hire car sent, and then on Monday car recovered to Ford dealers round the corner. All free to me.
And of course when car off the road I get a hire car.
So even though currently a 40% tax payer I think this is a good deal for now. We own the wife's car so less hassle IMHO.
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So for my Focus example that's 15170 x 19% x 22% / 12 = £52.84 per month. Not bad for a fully financed new or almost new car in my opinion. It is when you're on 40% tax people think own car plus allowance better... me ... I've benefitted a few times from a company car, e.g.
Your comments are valid, but at a wholly different level to where BobbyG is.
He's trying to weigh up a job with better hours and a car (and it's going to be getting a Focus or an Astra, not a Passat 1.8T etc) vs losing £6000 gross salary.
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I did give an example of a Focus like he said he might be getting. And whilst he might not pay 40% tax now, depending on how near the threshold he is the reduction in tax allowance from taking the car could take him into the 40% bracket. But maybe with a drop of 6k maybe not.
But I'd say £6k drop in gross salary is a lot and the savings on maintenance and insurance of your own vehicle would be near that. You also pay tax for use of the company car so that might kind of cover the savings in insurance, maintenance, etc currently paid. But after tax, NI and as you point out pension contribution the £6k reduction in pay is probably the equivalent of £300 per month less take home pay.
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And yes, I am basic rate tax payer so get jealous of any 40% tax payers problems!!
Do bear in mind that your £6000 drop in gross salary is offset not just by tax, but also NI (11%), and possibly pension contributions (which might be a bad thing). You only pay tax on the car, nothing else.
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Many thanks for all your help and replies. Got a phone call today to say that I had not been successful with the interview so at this stage I do not need to worry about company car implications. However I now have a better understanding of what is involved if any futire jobs include a company car.
On the bright side, it means I don't need to contemplate selling my vrS!
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