Thanks for the replies.
So if I have got this correct, for example, the BMW 318d has a BIK value of £4675 and car tax (40%) of £1870. The BIK percentage for this particular model is 18%.
Does this mean I will pay 18% of £4675 at £70 per month and then add £155pm (£1870/12) car tax which gives a grand total of £225pm month.
I think we may be getting closer to a real figure now so I appreciate your help guys!
Thank you.
Edited by cilvilservant on 23/01/2009 at 08:20
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No, presumably the BIK figure of 4675 GBP PA is 18% of list price, so you pay 1870 GBP in tax on the car, assuming 40% taxpayer. i.e. 156 quid per month total.
Edited by SpamCan61 {P} on 23/01/2009 at 08:42
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No, not right yet. In your example the BIK is assessed at 18% of the list price (eg your £4675 gives a list price of £25,972). You are then taxed on this BIK at your normal highest rate - so if you are a lower rate tax payer you will pay 20% of £4675 = £935 pa / £77.92 pm, and as a higher rate tax payer you will pay 40% of £4675 = £1870 pa / £155.83 pm
As I have said before, provided you can get the car you want, a co car is almost a no brainer even for a higher rate tax payer - if someone could provide me with a financed, serviced, taxed, insured, MOTd £25k car for 25k miles a year for £155 pm I'll have two. It costs nearly that to run my 8 year old 80k Xantia that I only paid £3k for!
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Oh no, it gets worst! I completely understand now so thanks very much!
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>>> if someone could provide me with a financed, serviced, taxed, insured, MOTd £25k car for 25k miles a year for £155 pm I'll have two <<<
I agree. Some people (my brother-in-law, for example) argue that you're *actually* paying nearly £400 per month for a company car, because that's the figure you're paying 40% BIK tax on, and you should just take the cash alternative instead.
I argue in return that if I took the cash (let's say £4,800), I would lose 40% in tax anyway, leaving me with £2,880 per year to purchase, tax, insure and service a family barge.
For me, it makes sense to have the car. Then servicing, tyres etc is not my problem.
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My wife currently receives the car allowance - £6000 pa before deduction but her company are stopping this and giving people cars or the choice to opt out. We could opt out, continue to pay our loan at £177 per month, plus insurance, servicing etc. Or simply get rid of our car, clear the loan and pay a fixed price of £150 (approx).
Only downside is the loss of the allowance but it's all relative! At least depreciation won't hit us which is where we win as we have had 6 cars in 5 years (BMW, Audi, VW, Volvo etc) and we have lost a lot of money. A company car will give us the disclipline not to squander money!
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I think you are making the mistake that a lot of people do in working out whether a company car is better of taking the cash for car allowance.
In your example of being offered £4,800 which gives you £2,880 after tax you also need to remember that you will not be paying the company car tax that you would be with the company car. Assume this is £155 p/m (£1860 pa) then what you have actually got to play with is £4,740 per year or £400 per month - like your brother said.
I'm not saying that its better to take the cash, getting a company car certainly is less hassle and gives you peace of mind over things like servicing, but I think that a lot of people misjudge the value of the cash for car alternative...
use this useful link to work out the cash alternative on a particular car....
extranet.lvl.co.uk/hosting/carportal/
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As I have said before provided you can get the car you want a co car is almost a no brainer even for a higher rate tax payer - if someone could provide me with a financed serviced taxed insured MOTd £25k car for 25k miles a year for £155 pm I'll have two. It costs nearly that to run my 8 year old 80k Xantia that I only paid £3k for!
Sadly it doesn't usually work like that! or everybody would have one!
I can now have a "no cost to you" company car - only thing I pay for is fuel.
Well not really - A BMW320d Msport touring 25k miles a year and replaced after two years for a total all in cash cost to me of £8,000 a year.
Looks like I won't be changing!
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Always thought it a 'joke', that I had to pay £500/year as BIK, for my Maestro van, which I bought, with MY £$£$ (my own companies cash) when it wasn't even worth that much, after a few years!!
& often wondered why, when youy see so many big businesses, shiny, new, liveried vans, in supermarket/DIY sheds, car parks, collecting personal shopping, at weekends.
That was until I discovered that HM Gov were paying overtime, to tax officials, to sit in said carparks, to assess this situation & ensure the users of the vans would be made to pay ther share.
Or not!!
VB
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