Company Car Tax
Discussion
Quick question - I'm looking at ordering a company car. Obviously there's a Benefit In Kind tax I have to pay which will come out of my salary (20% = £86.56, 40% = £173.11). When I went to order I asked the lease company a simple question which worringly they could answer, so I thought I'd throw it open to the masses on here.
Q). Is the BIK taken out of my salary before I pay tax (gross) or after I pay tax (net)?
Obviously it makes a big difference to the cash I end up with in my pocket so want to be sure before I order (as I may just take a cash allowance instead).
Thanks all.
Q). Is the BIK taken out of my salary before I pay tax (gross) or after I pay tax (net)?
Obviously it makes a big difference to the cash I end up with in my pocket so want to be sure before I order (as I may just take a cash allowance instead).
Thanks all.
The BIK is an amount that is taken from your tax free threshold which will be £7475 for 2011-12, and is reflected in your tax code.
£7475 minus the Vehicle's BIK amount e.g £2000 = Tax free threshold now £5475, so is indirectly taken from your PAYE salary.
I maybe wrong, but this is how I understand it.
£7475 minus the Vehicle's BIK amount e.g £2000 = Tax free threshold now £5475, so is indirectly taken from your PAYE salary.
I maybe wrong, but this is how I understand it.
Edited by DickSkruttock on Thursday 20th January 13:16
DickSkruttock said:
The BIK is an amount that is taken from your tax free threshold which will be £7475 for 2011-12, and is reflected in your tax code.
£7475 minus the Vehicle's BIK amount e.g £2000 = Tax free threshold now £5475, so is indirectly taken from your PAYE salary.
I maybe wrong, but this is how I understand it.
agreed.£7475 minus the Vehicle's BIK amount e.g £2000 = Tax free threshold now £5475, so is indirectly taken from your PAYE salary.
I maybe wrong, but this is how I understand it.
Edited by DickSkruttock on Thursday 20th January 13:16
I'm sure when I had mine it was simply classed as additional income. For example, BIK value of car equals, say, £3000 PA and value of fuel card was £3000. So the tax man classed it as me earning an extra £6000 a year above what I was actually paid. It's nice, having an essential use company car (65,000+ miles PA) and paying £200 a month out of your own pocket for the pleasure.
I was talking to someone else about this last night on another thread. When deciding whether to take the cash or car option you need to think of how many miles per year you will be doing.
I think when I worked it out you need to do around 30k miles a year to make a company car pay for itself.
There are pros and cons to each option
obviously the pros to a company car are the hassle free motoring, but the con is the massive amount of tax you will pay
the pros of running your own car is that you can usually get a better car, you can claim tax back for using your personal car for work, and you are also not tied in for 3 years (or whatever your company guidelines are).
The cons are obviously you need to pay to run and maintain it.
I personally went for the cash option of £500 per month. I've had 3 jags and currently on a Volvo. As long as when you do your figures you account for tax, MOT and a set of tyres a year you should be ok.
So as I said on the other thread, everyones position is different but for me it worked out a lot better to run my own cars and pocket the money. Most people in my company seem to have dropped out of the car scheme now as well
I think when I worked it out you need to do around 30k miles a year to make a company car pay for itself.
There are pros and cons to each option
obviously the pros to a company car are the hassle free motoring, but the con is the massive amount of tax you will pay
the pros of running your own car is that you can usually get a better car, you can claim tax back for using your personal car for work, and you are also not tied in for 3 years (or whatever your company guidelines are).
The cons are obviously you need to pay to run and maintain it.
I personally went for the cash option of £500 per month. I've had 3 jags and currently on a Volvo. As long as when you do your figures you account for tax, MOT and a set of tyres a year you should be ok.
So as I said on the other thread, everyones position is different but for me it worked out a lot better to run my own cars and pocket the money. Most people in my company seem to have dropped out of the car scheme now as well
alcovrugbyfan said:
I was talking to someone else about this last night on another thread. When deciding whether to take the cash or car option you need to think of how many miles per year you will be doing.
I think when I worked it out you need to do around 30k miles a year to make a company car pay for itself.
There are pros and cons to each option
obviously the pros to a company car are the hassle free motoring, but the con is the massive amount of tax you will pay
the pros of running your own car is that you can usually get a better car, you can claim tax back for using your personal car for work, and you are also not tied in for 3 years (or whatever your company guidelines are).
The cons are obviously you need to pay to run and maintain it.
I personally went for the cash option of £500 per month. I've had 3 jags and currently on a Volvo. As long as when you do your figures you account for tax, MOT and a set of tyres a year you should be ok.
So as I said on the other thread, everyones position is different but for me it worked out a lot better to run my own cars and pocket the money. Most people in my company seem to have dropped out of the car scheme now as well
And dont forget you get taxed on the car allowance - so if in the 40% tax bracket, that £500 is only £300 in your pocket.I think when I worked it out you need to do around 30k miles a year to make a company car pay for itself.
There are pros and cons to each option
obviously the pros to a company car are the hassle free motoring, but the con is the massive amount of tax you will pay
the pros of running your own car is that you can usually get a better car, you can claim tax back for using your personal car for work, and you are also not tied in for 3 years (or whatever your company guidelines are).
The cons are obviously you need to pay to run and maintain it.
I personally went for the cash option of £500 per month. I've had 3 jags and currently on a Volvo. As long as when you do your figures you account for tax, MOT and a set of tyres a year you should be ok.
So as I said on the other thread, everyones position is different but for me it worked out a lot better to run my own cars and pocket the money. Most people in my company seem to have dropped out of the car scheme now as well
DickSkruttock said:
The BIK is an amount that is taken from your tax free threshold which will be £7475 for 2011-12, and is reflected in your tax code.
£7475 minus the Vehicle's BIK amount e.g £2000 = Tax free threshold now £5475, so is indirectly taken from your PAYE salary.
I maybe wrong, but this is how I understand it.
This is correct, the BIK for car and/or fuel is deducted from your tax free allowance for the year, it's all explained on the coding notice when you get a new tax code, and it's best to tell the tax man as soon as you get the car, rather than relying on your employer, underpayment screws your tax up in the future, sometimes years after you gave the car back.£7475 minus the Vehicle's BIK amount e.g £2000 = Tax free threshold now £5475, so is indirectly taken from your PAYE salary.
I maybe wrong, but this is how I understand it.
Edited by DickSkruttock on Thursday 20th January 13:16
Ring HMRC, i've always find them dead helpful with regard to company cars/tax etc.
This site is good;
http://www.comcar.co.uk/newcar/companycar/taxcalc/...
http://www.comcar.co.uk/newcar/companycar/taxcalc/...
Edited by mercfunder on Thursday 20th January 13:45
edo said:
alcovrugbyfan said:
I was talking to someone else about this last night on another thread. When deciding whether to take the cash or car option you need to think of how many miles per year you will be doing.
I think when I worked it out you need to do around 30k miles a year to make a company car pay for itself.
There are pros and cons to each option
obviously the pros to a company car are the hassle free motoring, but the con is the massive amount of tax you will pay
the pros of running your own car is that you can usually get a better car, you can claim tax back for using your personal car for work, and you are also not tied in for 3 years (or whatever your company guidelines are).
The cons are obviously you need to pay to run and maintain it.
I personally went for the cash option of £500 per month. I've had 3 jags and currently on a Volvo. As long as when you do your figures you account for tax, MOT and a set of tyres a year you should be ok.
So as I said on the other thread, everyones position is different but for me it worked out a lot better to run my own cars and pocket the money. Most people in my company seem to have dropped out of the car scheme now as well
And dont forget you get taxed on the car allowance - so if in the 40% tax bracket, that £500 is only £300 in your pocket.I think when I worked it out you need to do around 30k miles a year to make a company car pay for itself.
There are pros and cons to each option
obviously the pros to a company car are the hassle free motoring, but the con is the massive amount of tax you will pay
the pros of running your own car is that you can usually get a better car, you can claim tax back for using your personal car for work, and you are also not tied in for 3 years (or whatever your company guidelines are).
The cons are obviously you need to pay to run and maintain it.
I personally went for the cash option of £500 per month. I've had 3 jags and currently on a Volvo. As long as when you do your figures you account for tax, MOT and a set of tyres a year you should be ok.
So as I said on the other thread, everyones position is different but for me it worked out a lot better to run my own cars and pocket the money. Most people in my company seem to have dropped out of the car scheme now as well
I played about with all the numbers - if you don't mind a cheaper, older car, it can work (but some employers have terms on the car you buy, such as age, number of doors).
You have to compare what you could do privately versus a brand new, spec'd to your liking car, with zero running costs (aside form the tax and so on), no surprises, no tyres, no pissing about if it gets damaged, no excess, no insurance to worry about.
All about fixing your outgoings, and removing the risk.
You have to compare what you could do privately versus a brand new, spec'd to your liking car, with zero running costs (aside form the tax and so on), no surprises, no tyres, no pissing about if it gets damaged, no excess, no insurance to worry about.
All about fixing your outgoings, and removing the risk.
edo said:
All about fixing your outgoings, and removing the risk.
^ This.If you tie up one of your main outgoings (a car) with your main income (your job), then if you lose the latter, the cost of the former also disappears.
In other words, lose yuor job, you no longer have the company car expense.
In my company you're allowed to do anything from pocketing the dosh as additional salary (you need to have a car ready to use though there are no limits - you could have an ultima if you felt like it), right up to taking the company car money, doubling it with your own pre-tax pay and getting something nice to drive.
C
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