Company car allowance

[iwanta]

Hello wise mumsnetters.

Does anyone have any advice on wether to take a car allowance or company car?

Allowance is £4K per annum
45p per mile

I go back and forth between the options, obviously less risk taking the company car as they just sort everything for me. But if I get a good deal and a car loan, it would be like work practically buying me a car?

I take home a small amount of UC for nursery fees, I feel like this may be affected if I take the monthly allowance for a car?

Would it be more practical to take the company car for another 4 years and then when my daughter is in full time Ed ans I am back to working full time, I then take the allowance so my UC is not affected?!

Helpppp

The benefits to me when I had a Company car before we were forced to take the allowance were:
If it needed new tyres I could do that during work time.
If it needed a service I was provided with an alternative car.
The company took care of the insurance (if you have your own car you have to tell your insurance company that it used for business not just commuting) and road tax.
It was replaced every three years.
Any problems / breakdowns were down to the company to resolve / pay for.
Fuel for business use was paid for per mail (at the AA's business mile rate).
It was easy with no risks or bills.
Downside - you paid tax on it as a benefit (if it was also used for personal use).

This was a few years ago and there maybe different tax rules now.

It’s been a while since I had either, but a company car allowance is just looked at as additional income by HMRC. You will pay normal tax & NI , but not pension deductions, and the company won’t contribute pension on that amount. So yes, it has the potential to affect UC.
You will however be assessed as having a benefit is you take a company car and are allowed personal use, and the amount will vary according to car value, engine size, emissions etc. That could cost more than you lose on UC.

So, before you make your mind up, find out what the assessed tax is on the company car, find out if there are restrictions on what size / type car you can spend an allowance on ( does it need 4 doors for example; any additional safety equipment ) , and then check the UC issue with HMRC.

Thanks both for your help! Sounds like there are benefits to both. I guess it's tricky as I have to make up my decision now, when I don't know what the company car would be?! Once I have made up my mind I can then choose from around 50 cars.

I think I will just keep the company car, at the moment I can afford all my bills etc and I don't want to put this at risk by making the wrong decision. even a few hundred pounds in the wrong direction would really screw me up monthly, I have no partner and no back up.

You need to do your sums.
Decide what car you'd want.

Then calculate the cost of buying and running it, could you make a saving by buying nearly new.

Then calculate the tax cost of the equivalent car on the BIK.

Your insurance will reduce as you build no claims.
Some companies replace cars after 3 years others 4.
I tend to run mine to 5+ so building savings the years I have my car paid out right.

Only you can do the sums. Own car is also easier if you move jobs.

I agree with the pp. you need to do your sums. There is no easy way to tell which is more beneficial until you do the sums.

Our company car allowance scheme said cars could be no older than 6 years.

If you have a company car and give it up you can transfer your 'company' no-claims to a private insurance policy.

If you have a company car and are made redundant (I was) you need to very quickly find an alternative (if you still require a car)

... and then there is Private Car Leasing - another option with its own dilemmas!

Thanks both.

I think I knew deep down this would be the case.

I just don't fully understand all the different tax elements. I will do some further reading, and start a spreadsheet now.

Might be worth speaking with your pay role on what tax and NI you'd be paying.

Moving out of company car into your own insurance companies will generally only give 3 years no-claims regardless how long you've been driving company cars. Not sure why but they do.

Thank you!

It's too confusing!

So for a company car I pay..

Vehicle Benifit tax
Fuel benifit tax (I pay £20 a month for all my fuel, so not sure if this applies or not?!)
And tax?

*benefit 🙄

Before I came out of the company car scheme I was paying more in tax for the fuel card than I was for the car.

My current company pays business fuel at 7p per mile as an expense rather than free personal fuel via fuel card.

Ah wow. So it's definitely worth looking in too! I have emailed my HO for some clarifications.

Fuel benefit can work out really expensive and contributions you make towards private fuel are disregarded for working out the benefit.

If you are given a choice of cars, ask for the p11d values and you will be able to to some calculations to see which is the better value.

The p11d value of the benefits might be taken into consideration for uc as well

Taking the car could also affect your child benefit. My DH earned 30k a year, he had a company car and a fuel card. The value ofbthe car and fuel is a benefit in kind (BIK) and classed as income by HMRC. So his 30k wage plus the BIK value took his 'income' over the threshold and we had to pay all of the child benefit we'd received back.

Like a PP said, you need to find out the p11d values of the car and the fuel. The values they used for my DH's car (a skoda) and fuel, pushed his actual 30k income to over 60k.

I’m just changing from a company car to a car allowance. When I took the company car I was doing quite a few miles, visiting construction sites which often had not great access and just wanted a hassle free arrangement with known costs.

Now I predominantly WFH, I’m paying a lot of tax for a car which sits on my drive not getting much wear and tear. The allowance easily pays the monthly costs for a car on PCP at 0% with enough left over to cover services, tyres, insurance etc. My main motivator though was having a car that’s mine (or will be at the end of the contract) so I actually have an asset rather then paying for something I don’t own. I also don’t think I’ll still be working for the company in 5 years time and a company car clearly has to be given back when you leave. I’d then have to sort out my own car potentially without the benefit of a car allowance.

Thanks @Awakened22 I'm the exact same RE visiting site and now working from home 95% of the time, my mileage has dropped drastically.

I have emailed my work, to gain more information and how much i would receive each month.

@Trulyweird1

It’s been a while since I had either, but a company car allowance is just looked at as additional income by HMRC. You will pay normal tax & NI , but not pension deductions, and the company won’t contribute pension on that amount. So yes, it has the potential to affect UC. You will however be assessed as having a benefit is you take a company car and are allowed personal use, and the amount will vary according to car value, engine size, emissions etc. That could cost more than you lose on UC.

So, before you make your mind up, find out what the assessed tax is on the company car, find out if there are restrictions on what size / type car you can spend an allowance on ( does it need 4 doors for example; any additional safety equipment ) , and then check the UC issue with HMRC.

You get taxed just the same if you had the actual car….it doesn’t make a difference. Taking the cash is “cash in kind” benefit and taxed at same rate as a car. Same with medical insurance or any other taxable benefit you get for. Your company.

I did a lot of calculations to work out what was best. For me 2 things nailed it to take the cash
The first being the range of cars was limited - my eldest dc was 6 foot 4 and still growing. …sort of ruled out a lot of the options given🤦‍♀️
Second was I was happy to run cars into “the ground” e.g. buy new then keep for 8-10 years till it got unrealiable. I used to put the allowance into a seperate account space and use it to pay for all the expenses that would be covered by company car such as breakdown, servicing, mot, insurance etc each year. And then I’d save the rest into the account. At the end of that 8-10 years I’d easily have enough to pay for next car outright in cash. So it worked out not costing me anything to do it that way. Would have costed me more if I was changing cars regularly.

Also when I retired I got to keep my car! I’d only bought it 18 months earlier. And I still had some savings in my car account left to run it for another couple of years before starting to pay running cost form my pension. If it had been the company car I’d have needed to give it back and pay for a car myself.

@Opti2021

Taking the car could also affect your child benefit. My DH earned 30k a year, he had a company car and a fuel card. The value ofbthe car and fuel is a benefit in kind (BIK) and classed as income by HMRC. So his 30k wage plus the BIK value took his 'income' over the threshold and we had to pay all of the child benefit we'd received back.

Exactly. Form tax perspective it makes no difference at all if you get an actual car or allowance. The HMRC see it as a taxable perk. If you’ll end up significantly worse off based on your current wage, talk to your company. Ask them to look at your salary as well so you aren’t actually worse of for taking it. If they refuse, you can opt not to take it. But child benefit is £1,200 ish and just running a car (never mind axing for one) is around £1500 -£3000, so unlikely that overall you’ll be actually worse off.

For me I get To drive a 85k Audi e tron. And because it's electric it costs me the same as a typical lease for a 20k car. Insurance. Maintenance the lot is all paid in