As a hire rate tax payer, the £5k allowance would be taxed at 40% and you'd also pay National Insurance on it. So after that you'll get just over around half of it in your take home pay.
If you take a company car you'll pay tax on the benefit in kind as Altea Ego says. How much you pay depends on it's list price when new and the CO 2 emissions.
|
I am retired now but when I worked I took the cash - more importantly if you do a reasonable mileage is find out the rate per mile!
Last 2 companies were £300 / mth and then 40p (10k miles)and 25p (over 10K), £500/mth and then 15p / mile flat rate
The £300 & £500 payments are taxed and on my mileage the £300 and higher mileage allowances made it better for me!
Between the 2 companies they bought the Honda (+servicing tax, Ins etc) twice and I got £2000 T/I which was a bonus as I assumed in my calculations it would be worth next to nothing. All my private running petrol was for free!
Why did the allowances work best?
1) Bought brand new Honda for £10,000 outgoing model with £5,000 off list
2) Looked after it - regular servicing
3) Drove it carefully - saves wear and tear + petrol
4) in 93,000 miles apart from brakes, tyres, exhaust (x3) repairs were under £300
|
|
A lot of companies pay a lot less per mile if you get an allowance. My employer pays a fixed amount based on car allowance grade when you take the cash. So if you drive something economical you could still make money per mile but anything uneconomical will cost you. but I know someone who drives an M3.
|
|
|
|
I dont think i would be offered a petrol card, not sure about leasing.... I am going to see them tomorrow, but I think it will be like, "here is the cash do what you want". Now if I choose to buy a car with it, will I still have to pay TAX and NI on the allowance? or should I ask the companyt put it in as taxable benefit? wont that affect my personal allowance?
Kash
|
The car 'allowance' that they offer will be taxable and NI due. It won't be included for pension or bonus usually.
You will be taxed no matter what you choose: A company car will be taxed using the BIK and your car allowance will be taxed as income (40% plus NI - your personal tax code will be adjusted for the company car. I've never taken the cash alternative but I guess that they will also adjust your tax code to collect that as well)
You just need to work out what is best for you. If you do a high mileage, I'd go for the company car normally. If you do average miles, go for the allowance usually but you do need to work out what each will cost you.
Good luck with the job offer.
Edited by a900ss on 20/07/2009 at 13:28
|
Ok I get that,
either way I get taxed, if I take the cash i wil pay TAX/NI, If i get car using the cash (I dont pay TAX and NI on cash but will pay TAX on CAR based on BIK?
I was thinking of getting a Mercedes C200K 1.8 valued at 28k (say 30k with option extras).
I dont do high mileage (10k under 3k business, 7k personal).
im thinking I will paying around £200/£250 a month tax on the car, which is roughly what I would get taxed on the 5k allowance.
or am i mistaken?
|
There a a variety of calulators around, including this one:-
www.hmrc.gov.uk/calcs/cars.htm
..and you get the emissions figure for the car from here:-
www.vcacarfueldata.org.uk/search/search.asp
Which I reckon gives around 7200 BIK value for the Merc. i.e. approx. 300 quid a month deductions in tax and NI.
Alternatively pay tax and NI on allowance of 5K = 210 quid a month after deductions.
So, roughly 500 quid / month difference between the two options.
|
|
|
|
Now if I choose to buy a car with it, will I still have to pay TAX and NI on the allowance?
If you get a cash allowance you must and will pay tax and national insurance on it. Only taking a car will be treated as a taxable benefit and effecting your personal allowance.
Even if you take the money and keep your existing car (make sure it's insured for business use if used for business) you will still pay the tax and NI. It will just be added to your salary.
|
anyone point me to a calculator so I can work out how much tax it works out either way.
Idealy I would like to change the car every three years (eventually end up owning it).
however I need to make sure I am not paying over the ends for it :) currently looking £400 on top of the allowance a month
|
anyone point me to a calculator so I can work out how much tax it works out either way.
See my post I've just made a couple of messages up thread
|
Hi,
I had a look at your post above: I dont get how you worked out £500 difference? the difference between being taxes £300 for BIK and £210 PAYE is £90?
So if I got a car I would pay £90 more tax, plus what ever I have to pay on top to get the car? where did you get £500 from
(sorry for the confusion).
Regards
Kash
|
Car allowance = + £210 (in your pocket)
Company Car = - £300 (to the taxman)
Difference = £510
I hope the job isn't anything to do with numbers ;)
Edited by Lou_O on 20/07/2009 at 14:50
|
|
|
|
Taking the company car means 300 quid increased deductions per month, taking the allowannce gives 210 quid extra income per month ( both figures net), so 500 quid ish difference in 'take home pay' between the two options.
Edited by SpamCan61 {P} on 20/07/2009 at 14:50
|
|
|
|
|
You are getting a 5k allowance - which is £245 cash per month after tax.
Then looking at paying a further £400 a month "top up". i.e. £13k or about 25% of your annual salary is going on the car... presumably insurance and servicing on top as well.
Your money, do what you like with it. I think it's madness.
Your car allowance will about pay for you to run a 3 year old Vectra. Not a brand new MB. A car costing 28k is virtually the entirety of your annual income. (I appreciate it is not every year, and that it does have a residual value.)
|
I roughly worked this out, I should be able to get the car from MB for £330 pm, so that means I need to add £80 a month, there service plan is £50 a month (total £130 a month), plus insurance lets say £150 total £280 pm.
If you goto MB website you can see there 3 year deals. I appreciate what your saying paying £400 a month for a car :) I do not want to do that either, I wouldnt mind paying £200~ on top.
here is the link to the offer:
tinyurl.com/mgmjn3 (links to Mercedes Benz Finance)
so that means I just need to pay for insurance and maintenance
here is link to MB maintenance:
tinyurl.com/ngl9xk (Links to Mercedes Benz Service Deals)
so that leaves insurance.
also income would be £50~ I will obviously be pushing to get a little more plus increase in car allowance. I havent included bonus which would be 10% etc...
would this be correct or am i missing something?
Edited by rtj70 on 20/07/2009 at 15:26
|
|
And then still £14k to pay at the end of the 3 year deal to keep the car?
|
this is fine, I would be looking to exchange the car for a new one and continue the plan until I have enough equity to buy it out right....
I would think that would be the best way to get it ?
|
|
|
|
OK have I got thsi right ( haven't clicked on the links yet)
Option 1 company merc. cost 300 quid per month all in.
Option 2 take allownace and finance Merc.
Merc. costs 330 per month, plus 50 servicing, plus insurance ( ???) + road tax rouighly 20 per month.
So total is 400 per month plus insurance.
So if your insurance is less than 100 per month then taking the allowance and self fincancing looks like a slightly cheaper option assuming you make no allowance for unforeseen bills / changes of cirumstance etc.
|
|
Option 1 would be great, need to ask them what they can do :)
|
|
|
|
|
If the company leases the car and charges you for additional cost then you are safe if you leave/get made redundant - they have to negotiate with the lease company to end the agreement.
If you take on any form of finance to acquire the car then you'll still have to pay that if you get made redundant. Regardless of what you think about the state of the market, that's a possibility.
Since you could get made redundant at any time, it could make sense to use a basic car for the moment that will do the job of 10k a year, and look at a more expensive option in a year or so.
|
thanks for the advice, I am not going to buy a MB I am just looking at the most expensive scenario to see what would happen :)
I appreciate that if I financed the car I would be responsible for it, in which case I would never finance a car without having the money to pay for it out right :) (but id rather hold onto it until I have to give it up).
Also the option would always be there, so I could wait a year to see how the job pans out :) and make sure I have bigger deposit :) etc..
|
|
|
If it was me, and taking into account the current climate and job security, I would either take a company car or use the money to buy a 2 or 3 year old car (or even an ex-demonstrator type deal) which would eventually belong to me when paid.
I would not be going out signing up to a 3 year lease deal and putting money towards a car that will never be mine.
|
|
Agreed, I wouldnt want to pay for 3 years and gettig nothing out of it. I apreciate in the current market its a risk, but then I could always give a 10k deposit to make things a little easier. I would probably not get a NEW car more like a year or two old, so decpereation should have kicked in :)
|
Do you not have a car at the moment? You don't seem to have taken account of the cost of running your current car.
If you haven't got a car now, and you get offered a fully expensed company car, then based on all your other questions I suggest that you take it. It's the easiest, most secure way of running a half-decent car.
|
|
The Mrs has a car, it cost about £110 a month to run (which is not alot) Mrs does work so not an issue, its a polo :)
|
|
I think the simple problem is this, the company most likely cannot go over 50k (although i will be pushing for a higher base) so they can probably get away with giving me the car allowance.
If i stick out the first year save the money, and then Ill have the deposit and second year go and get the car, otherwise, if it doesnt make the difference, get the car within a few months.
regardless either way 50k is minium i would a year, so I need to work out what I am comfortable with paying on top, and I would say £200 max, so I need to get car allowance increased.
I am sure it would be easier to increase allowance since it wont add to the bonus etc...
|
Your example of a new Mercedes Benz model does not exist. There is a C180K but that is a lot cheaper than £29k.
Using say a MB C220 CDi BlueEFFICIENCY Sport as an example, then the list price is around £29000. So the BIK amount you will pay each month is £223pm (emissions of CO 2 are 161g/km).
On our company scheme, the amount this car would cost per month is approx £450. We get either a cash allowance or a monthly amount to spend on a car based on our "car grade". We can also pay upto a third again on top of this out of our salary. Trading down means the amount not spent goes into your salary.
For quite a bit less money, I could get a VW Passat CC 2.0 GT TDi DSG... and a lot of other cars would be on my list too. Now if I got a Scirocco 1.4TSi instead the price difference per month to the Merc example above is significant.
Edited by rtj70 on 20/07/2009 at 15:42
|
|
even going by what you said, 450pm * 12 = £5400? are you talking after tax?
|
In my experience, salary is more negotiable than car allowances/company car budgets.
I have never been able to negotiate a better allowance/car because each grade of employee has the same allowance however salary is generally over a band (ie different employees doing the same job will have the same car allowance but could have slightly different salaries)
|
Car allowances work differently in different companies. I asked for mine to be increased by one grade in 2007 and my manager put it up two. My salary, job title, etc. stayed the same. My car grade is now higher than some people more senior than me - but they have higher salary.
So to my surprise in 2007, car grades can be changed ;-) I think if I took the cash it is about £6500pa.
Edited by rtj70 on 20/07/2009 at 15:55
|
ok can we make this more realistic,
If I earn 50k plus 5k allowance I get
£3230.10 after tax and NI.
If I take the cash and get my own car of choice (Merc is my ideal car, looks like i need to face reality :) ), how would this work?
Would I then pay for the car on finance (as I mentioned earlier there finance deal says £330 + £50 service/maintenance + £20 Road Tax + insruance £100~ (per month for all).
bringing down the income to £2730 (Do I still need to pay tax on the car?)
Regarding negotiating the car allowance, I believe the role has a salary cap, so they suggested topping via the car allowance, again the only reason I am even thinking of getting the car is because the car allowance doesnt affect the bonus etc... so I might as well use it for something usefull :)
Edited by kashif on 20/07/2009 at 16:26
|
You will pay tax only ONCE.
So if you take the company car, you pay the BIK.
If you take the allowance, it will be taxed before you even get it and you can spend it how you choose. You can spend none of it, all of it or add to it and spend more but you will pay no more tax other than what you pay on the full allowance given to you by your employer.
Edited by a900ss on 20/07/2009 at 16:34
|
bringing down the income to £2730 (Do I still need to pay tax on the car?)
No you are not paying any other tax on the car if you are buying it using your car allowance. ( ignoring road tax fro now)
|
(Do I still need to pay tax on the car?)
No. It's your car which you bought with your allowance which you paid tax on. It's only taxable if it's a company car.
Your questions are bizzare to be honest. What kind of job are you going for that pays £50K+ bonus + car allowance?
|
why is it bizzare, I work in IT field, 50k is average for what I do, bonus is pretty standard, the problem was I earn near 60k at moment, so the new company giving other benefits one of them being the car allowance.
Thanks for explainig the Single tax :) I was getting confused. So its only worth going the company car root if the tax is less :)
I think I am getting it now :)
|
why is it bizzare I work in IT field 50k is average for what I do bonus is pretty standard the problem was I earn near 60k at moment so the new company giving other benefits one of them being the car allowance. Thanks for explainig the Single tax :) I was getting confused. So its only worth going the company car root if the tax is less :) I think I am getting it now :)
Not always. How much is the convenience of a company car worth to you? If anything goes wrong, you get a free hire car and no bills to pay. Servicing, tyres, etc are all just a call away and often they will collect the car for you. A company car 'may' cost a bit more in tax but you will get no unexpected bills as the tax you pay is known. I prefer the ease that a company car offers. My last company car was a Merc C 220Cdi, leather, auto, etc. A car much better than I would have got from an allowance (£500/month) at my mileage. The other option, as already stated, if you want to 'make' money, is to get a 3 year old Vectra/Mondy/Avensis that has already depreciated.
|
I see, thank you for the advice I will find out tomorrow evening what I will actually get out the negotiation, I just wanted a heads up.
You are correct the piece of mind of a company is always better, just the fact I wont be owning it:(
|
I've just got back from picking my company car up after a service. When it's in for a service I would either normally get a hire car (paid for) but today I just used taxis as working from home and that will be cheaper for the company.
The front tyres need replacing too... so more cost but not for me. I'll get them to come to the car over the next couple of days.
As for hire cars etc in an emergency, the lease company would get a hire place to open in the middle of the night if a car was needed. All part of the service.
Some will say if you are a higher rate tax payer and do high miles then take the money as you can get tax back on the allowance paid for the mileage. But if doing high miles the counter argument is to take the car.
Before deciding what to do, check out what the car scheme is like. Until recently our scheme no longer had Audi, BMW and Mercedes on it. At one time we could have anything within reason. Now they are back.
|
You are correct the piece of mind of a company is always better just the fact I wont be owning it:(
In the Mercedes link you posted earlier - that's a PCP (Personal Contract Purchase) deal, so you don't own that car until you make the final payment at 3yrs, and the main aim of those schemes is that you won't pay the final payment but will instead roll into a new 3 year scheme. So you're effectively renting the car for 3yrs.
Even with hire purchase you don't own the car until the last payment is made.
The problem with those schemes, or even buying outright, is that the car is at your risk. That's not a good thing.
It rarely makes financial / common sense to opt out of a company car and take the money, it's really only worth it if you're prepared to downsize from the level of car you're expected to drive, or if you want/need a car that isn't available on the company car list.
So if the company is offering Forc Focus and you want a Merc C Class then go for it, but don't try and make the financial calculations between the two cars make sense.
Edited by Bill Payer on 20/07/2009 at 19:14
|
it's really only worth it if you're prepared to downsize from the level of car you're expected to drive
On which basis it can be *well* worth it.
|
|
|
|
|
|
|
|
|
|
