Paying company car tax whilst on SMP

[TheNoisyLion]

My current company car lease is due to expire and my options for a renewal are almost 60% higher per month, or to "opt out" of the scheme, meaning the business will give an allowance of £4k per year towards my own car- which I would have to purchase.

I'm due to start my maternity leave from beginning of December, and wondered if anyone had any experience of how company car tax impacted you when on SMP? If I'm calculated to receive the £184 per week, this will then be tax and NI deducted, then company car tax and personal mileage paid- I'm concerned the take home is going to be minimal, and I may be better off returning the vehicle and sacrificing mobility during my 9 months off.

Any advice would be appreciated

I think it will depend on a few factors such as your normal earnings, marginal tax rate and how long you are off.

Further complicated by it going over 2 tax years. The picture will look quite different if you normally earn £30k vs £230k for example.

Also if you only receive SMP or have any enhanced paid by your employer. Whether you normally have your fuel and insurance paid for vs the arrangements if you have a car allowance. Plus any rules/requirements regarding age or size of car.

Unless your employer is small and male dominated you're probably not the first person who's had to consider this so you're best asking your fleet manager and/or HR for help going through the numbers in your particular circumstances.

Also look at the rules on company car tax on the HMRC website to see if there's any allowances/caveats for employees on maternity leave.

But due to the increase in cost, I'd be tempted to use the allowance to lease or PCP a smallish car as a low hassle way of providing a car for the next 3 years. Then you can reassess. Another consideration would be if you're hoping to have a second maternity leave with this time.

I have a company car, it's electric so it's costing me £40 per month as a higher rate tax payer (will be £20 if I was a 20% tax payer). Do you have any idea what your car benefit will equate to?

Your car allowance will be £333 per month which if you are a basic rate tax payer will net you £220 per month - that won't get you far in buying a car and paying for insurance etc. a higher rate taxpayer would get £193. saying that, if you can get away with no car and you really need the money then it's an option.

Thank you all for the responses!
My take-home this year should fall short of the £50k mark as my mat leave will commence from Dec through to end of tax year in April meaning it should just fall short keeping me at 20% banding.
There will be no additional payment from the business I work for, so UK SMP will be all I receive (however eligible for child benefit as this is my first child).

I do agree, paying the higher rate in comp car tax per month for a vehicle will be far cheaper than leasing for the 9 months I have off (definitely not taking any unpaid time off in this economic climate!). I will need to clarify if I am to pay back my personal miles as this will be deducted from my salary too.

I have also asked my HR and Payroll team for some clarification before I have to make a choice to ensure its the most informed possible 🙏

Your taxable pay will be your salary plus your car benefit, so if you salary you will receive will be £50k then the car benefit may fall into that higher 40% bracket. I agree it will be worthwhile getting some personalised advice on it!