I need some advice from those with a good financial head...
Discussion
Hello,
I'm after a bit of advice really on what you'd do in my situation.
I'm 25 and have just been promoted to a new position.
Firstly:
Situation is, I earn circa £35k basic. I can either choose to opt in to a company car scheme, which will cost me around £100 of my own money to be able to drive the particular car I want, plus company car tax. I'm looking at a Golf GTD, as I'm limited to a choice of 3 manufacturers and diesels only. Or I can opt out and receive an extra £340 a month in my wage.
The 40% tax bracket is £37,400. So, would opting for the car mean I would have to pay my company car tax at the 40% rate, as it's a benefit in kind which is essentially the same as earning money Obviously, opting for the cash would push me into the 40% bracket, but would the car?
Secondly:
I have an 18 month old Cooper S with leather and a reasonable spec. My insurance, for various reasons, is a ludicrous £150 per month. I also pay £172 in personal loan repayments on the car, which will end in just under 2 years time. I reckon I could sell the car privately for around £14k.
I also owe circa £4000 on credit cards. So I have a combined, but manageable debt of £7k.
Now, what I'm asking is what it would make most financial sense to do, irrespective of the car I'm going to be ultimately driving. Do I sell the MINI, pay off the debt and hair a fair wedge in the bank, or opt out of the scheme, and spend the surplus on paying off the debts? After tax I reckon the £340 is likely to be £200.
Doing this would leave me with financial peace of mind - although I appreciate I'm not exactly in dire straight, and that £7k isn't a startling amount of debt - and almost no outgoings other than rent of £400 pm which includes bills, plus a few other bits and bobs such as phone bills etc.
Any advice is greatly appreciated.
Thank you.
I'm after a bit of advice really on what you'd do in my situation.
I'm 25 and have just been promoted to a new position.
Firstly:
Situation is, I earn circa £35k basic. I can either choose to opt in to a company car scheme, which will cost me around £100 of my own money to be able to drive the particular car I want, plus company car tax. I'm looking at a Golf GTD, as I'm limited to a choice of 3 manufacturers and diesels only. Or I can opt out and receive an extra £340 a month in my wage.
The 40% tax bracket is £37,400. So, would opting for the car mean I would have to pay my company car tax at the 40% rate, as it's a benefit in kind which is essentially the same as earning money Obviously, opting for the cash would push me into the 40% bracket, but would the car?
Secondly:
I have an 18 month old Cooper S with leather and a reasonable spec. My insurance, for various reasons, is a ludicrous £150 per month. I also pay £172 in personal loan repayments on the car, which will end in just under 2 years time. I reckon I could sell the car privately for around £14k.
I also owe circa £4000 on credit cards. So I have a combined, but manageable debt of £7k.
Now, what I'm asking is what it would make most financial sense to do, irrespective of the car I'm going to be ultimately driving. Do I sell the MINI, pay off the debt and hair a fair wedge in the bank, or opt out of the scheme, and spend the surplus on paying off the debts? After tax I reckon the £340 is likely to be £200.
Doing this would leave me with financial peace of mind - although I appreciate I'm not exactly in dire straight, and that £7k isn't a startling amount of debt - and almost no outgoings other than rent of £400 pm which includes bills, plus a few other bits and bobs such as phone bills etc.
Any advice is greatly appreciated.
Thank you.
40% Income tax actually begins to kick in at about £43000 a year total salary. The £37000 figure you quote above you add the £6300 personal allowance (the first bit of your wage that is not taxable) onto.
If you take the extra £340 a month in salary you will 'see' about £255 of it, not £200
If you take the car, in your situation you will only pay company car tax at 22% assuming your salary of £35000 represents your total income for the year.
The saving on insurance (£150 a month!!) alone probably makes it a good deal for you. Bear in mind you save on paying road tax, maintenance, tyres, depreciation of the vehicle etc too if you have a company car.
Why do you have to pay towards the car? The personal contribution of £100 a month will offset the tax payment a little but not much....Is the £100 payment due because the golf is above your budget?
What are the cars you can chose from?
As for cars, the BMW 118d is cheaper in income tax than the golf, but at 22% income tax band we are only talking a couple of hundred pound difference per year. For the cheapest taxed cars look for a CO2 figure of less than 120g / km. The rates will change in 2012 too and tax on 120g CO2 cars goes up a little so if you find a car that puts out less than 110g CO2 even better...The Cooper D or Volvo 1.6D are examples.
If you take the extra £340 a month in salary you will 'see' about £255 of it, not £200
If you take the car, in your situation you will only pay company car tax at 22% assuming your salary of £35000 represents your total income for the year.
The saving on insurance (£150 a month!!) alone probably makes it a good deal for you. Bear in mind you save on paying road tax, maintenance, tyres, depreciation of the vehicle etc too if you have a company car.
Why do you have to pay towards the car? The personal contribution of £100 a month will offset the tax payment a little but not much....Is the £100 payment due because the golf is above your budget?
What are the cars you can chose from?
As for cars, the BMW 118d is cheaper in income tax than the golf, but at 22% income tax band we are only talking a couple of hundred pound difference per year. For the cheapest taxed cars look for a CO2 figure of less than 120g / km. The rates will change in 2012 too and tax on 120g CO2 cars goes up a little so if you find a car that puts out less than 110g CO2 even better...The Cooper D or Volvo 1.6D are examples.
Edited by texasjohn on Saturday 5th June 21:05
texasjohn said:
40% Income tax actually begins to kick in at about £43000 a year total salary. The £37000 figure you quote above you add the £6300 personal allowance (the first bit of your wage that is not taxable) onto.
If you take the extra £340 a month in salary you will 'see' about £255 of it, not £200
If you take the car, in your situation you will only pay company car tax at 22% assuming your salary of £35000 represents your total income for the year.
The saving on insurance (£150 a month!!) alone probably makes it a good deal for you. Bear in mind you save on paying road tax, maintenance, tyres, depreciation of the vehicle etc too if you have a company car.
Why do you have to pay towards the car? The personal contribution of £100 a month will offset the tax payment a little but not much....Is the £100 payment due because the golf is above your budget?
What are the cars you can chose from?
As for cars, the BMW 118d is cheaper in income tax than the golf, but at 22% income tax band we are only talking a couple of hundred pound difference per year. For the cheapest taxed cars look for a CO2 figure of less than 120g / km. The rates will change in 2012 too and tax on 120g CO2 cars goes up a little so if you find a car that puts out less than 110g CO2 even better...The Cooper D or Volvo 1.6D are examples.
Thanks a lot for your help - it clarifies things a little.If you take the extra £340 a month in salary you will 'see' about £255 of it, not £200
If you take the car, in your situation you will only pay company car tax at 22% assuming your salary of £35000 represents your total income for the year.
The saving on insurance (£150 a month!!) alone probably makes it a good deal for you. Bear in mind you save on paying road tax, maintenance, tyres, depreciation of the vehicle etc too if you have a company car.
Why do you have to pay towards the car? The personal contribution of £100 a month will offset the tax payment a little but not much....Is the £100 payment due because the golf is above your budget?
What are the cars you can chose from?
As for cars, the BMW 118d is cheaper in income tax than the golf, but at 22% income tax band we are only talking a couple of hundred pound difference per year. For the cheapest taxed cars look for a CO2 figure of less than 120g / km. The rates will change in 2012 too and tax on 120g CO2 cars goes up a little so if you find a car that puts out less than 110g CO2 even better...The Cooper D or Volvo 1.6D are examples.
Edited by texasjohn on Saturday 5th June 21:05
I don't have to pay towards the car. I can have a bog standard 1.9 Golf for nothing, except the company car tax. I'm limited to either a Golf or an Astra - either way it has to be a diesel. Annoying as I'd rather have a 118d or 120d. I have to pay an additional £100 a month if I want the GTD 170 as it's above budget, yes.
The GTD is in a fairly low band due to its emissions.
hi there - texasjohn has provided some sound advice. Some other things to bare in mind:
Be careful of the employers policy on travel and fuel expenses. Will you recieve a fuel card that covers the cost of all fuel. There amy also be an assessable benefit in kind on this also. What rate will they pay per mile for fuel and how is this affected by who owns the car. The HMRC/AA agreed rate has not changed for some time (40p/mile) but most employers will pay much less than this for the use of a company car as you are not incurring the other overheads (repairs/maint/insurance/depreciation etc). Be aware also that if they do pay less than 40p/mile yhou may be entitled to a tax refund.
Depedning on the rates paid and the annual business mileage incurred, using your own car can pay for itself quite nicely.
Even if you make a contribution for the car it is essentially still a BIK. The value of the BIK is calculated on the CO2 emmissions and the list price of the car - be careful that this (and any other benefits such as healthcare) doesn't push you into the effective 40% bracket.
Be careful of the employers policy on travel and fuel expenses. Will you recieve a fuel card that covers the cost of all fuel. There amy also be an assessable benefit in kind on this also. What rate will they pay per mile for fuel and how is this affected by who owns the car. The HMRC/AA agreed rate has not changed for some time (40p/mile) but most employers will pay much less than this for the use of a company car as you are not incurring the other overheads (repairs/maint/insurance/depreciation etc). Be aware also that if they do pay less than 40p/mile yhou may be entitled to a tax refund.
Depedning on the rates paid and the annual business mileage incurred, using your own car can pay for itself quite nicely.
Even if you make a contribution for the car it is essentially still a BIK. The value of the BIK is calculated on the CO2 emmissions and the list price of the car - be careful that this (and any other benefits such as healthcare) doesn't push you into the effective 40% bracket.
peterbredde said:
hi there - texasjohn has provided some sound advice. Some other things to bare in mind:
Be careful of the employers policy on travel and fuel expenses. Will you recieve a fuel card that covers the cost of all fuel. There amy also be an assessable benefit in kind on this also. What rate will they pay per mile for fuel and how is this affected by who owns the car. The HMRC/AA agreed rate has not changed for some time (40p/mile) but most employers will pay much less than this for the use of a company car as you are not incurring the other overheads (repairs/maint/insurance/depreciation etc). Be aware also that if they do pay less than 40p/mile yhou may be entitled to a tax refund.
Depedning on the rates paid and the annual business mileage incurred, using your own car can pay for itself quite nicely.
Even if you make a contribution for the car it is essentially still a BIK. The value of the BIK is calculated on the CO2 emmissions and the list price of the car - be careful that this (and any other benefits such as healthcare) doesn't push you into the effective 40% bracket.
Hi. Thanks for your help people - much appreciated.Be careful of the employers policy on travel and fuel expenses. Will you recieve a fuel card that covers the cost of all fuel. There amy also be an assessable benefit in kind on this also. What rate will they pay per mile for fuel and how is this affected by who owns the car. The HMRC/AA agreed rate has not changed for some time (40p/mile) but most employers will pay much less than this for the use of a company car as you are not incurring the other overheads (repairs/maint/insurance/depreciation etc). Be aware also that if they do pay less than 40p/mile yhou may be entitled to a tax refund.
Depedning on the rates paid and the annual business mileage incurred, using your own car can pay for itself quite nicely.
Even if you make a contribution for the car it is essentially still a BIK. The value of the BIK is calculated on the CO2 emmissions and the list price of the car - be careful that this (and any other benefits such as healthcare) doesn't push you into the effective 40% bracket.
I won't receive a fuel card. Also, using my own car and opting out of the company car scheme will give me 14p(!) per mile. This barely covers fuel. I've no idea how much I would get if I were to opt for the company car. I will very rarely use the car for business miles.
The above advice leads me to believe that either opting in or out of the scheme won't lead me into the 40% bracket anyhow. Or that's how I've read it - I earn £35k, which will be £39k should I opt out, or £35k and probably £1100 in company car tax, so I guess neither of which would land me in the 40% group.
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