Take company car or opt out?

[TUS 373]

Can someone please cast their eye over the following and advise which is the better option financially, or tell me if there is an online tool that I can use to do the calculation:

Option A.
To be offered a BMW X5 3.0d but a deduction of £9,000 to come off my salary. Then I will have to pay tax on the Benefit in Kind on the value of the car, say £32K.

Option B.
Take the £9,000 in salary but pay higher rate income tax on it. Then Conract Hire a a VW Touareg 2.5d costing me £6,500 per year. List price also £32K.

This is ignoring maintenance and insurance - I just want to try and picture the scenario based on the above.

>>> Edited by TUS 373 on Wednesday 16th February 13:57

[obiwonkeyblokey]

dont forget the Range Rover sport mate

[Davel]

Eric

[Eric Mc]

Are you a higher rate tax payer?

[TUS 373]

Yes - higher rate tax payer.

[drop2cogs]

TUS 373 said:

Can someone please cast their eye over the following and advise which is the better option financially, or tell me if there is an online tool that I can use to do the calculation: Option A. To be offered a BMW X5 3.0d but a deduction of £9,000 to come off my salary. Then I will have to pay tax on the Benefit in Kind on the value of the car, say £32K. Option B. Take the £9,000 in salary but pay higher rate income tax on it. Then Conract Hire a a VW Touareg 2.5d costing me £6,500 per year. List price also £32K. This is ignoring maintenance and insurance - I just want to try and picture the scenario based on the above. >>> Edited by TUS 373 on Wednesday 16th February 13:57

According to the BMW website the list price of X5 goes from £36,110 to £38,060 (options are added for taxable value as well), and CO2 tax rating from 33% for a Manual SE to 35% for an auto of either variety,

So, for a higher rate taxpayer, the X5 will cost you a minimum of £36,110 * 33% *40% per annum (£4766,52), £397 per month.

That's on top of the £750 a month you are losing in salary (although that's £450 take-home). So the X5 is costing at least £10,200 a year.

Normally I would say that the advantages of someone else paying insurance and maintainance (plus the unforeseen things like vandal damage, accidents that are not worth claiming on insurance for etc.) outweigh the tax disadvantage, but in this case you'd probably be better off keeping the £9k salary and running the X5 if you really want one.

[Davel]

I had the X5 4.4i Sport, but chose to buy privately.

Having said that, since I much prefer the bike, I sold it and went down the 'for now' tax beneficial route of an L200 Warrior which is far more useful for work anyway - honest!

Have you the option of taking a one off dividend, paying the tax on that and then buying a vehicle privately? That way it's one tax hit.

Check it out though as I'm no accountant!

[TUS 373]

Thanks chaps.

The scenario is that I would be working for a company as an employee - but also free to do freelance consultancy too (the is an aside to this car question though).

I visted a VW dealer and took out a Touareg - I was very impressed with it. I was frankly amazed that it could be had on contract hire for just £6500 a year with unlimited mileage - not a standard VW deal it has to be said. This got me thinking about just taking the cash and doing my own thing car wise. Also means I can chop and change with more flexibility and have a new car every if so desired.

The X5 is a fine motor and there are many other nice cars on the list such as BMW 530d, Audi A6 2,5 tdi Quattro etc - but generally they offer £9K in lieu. So in my mind, it seems borderline financially when taking into account that insurance etc would also be provided.

Guess I may take the cash then and do my own thing afterall if this comes to fruition. Also, any business I conduct in my own time will be free of mileage checks and I will able to claim these miles back from my own business too.

Thanks again for everybody's considered opinions.