Company Car Purchase - PCP or BIK
Discussion
Which is the better option for an individual based on the following scenario:
a) Take a £300 taxable car allowance from the Company and PCP a car at £500 a month plus he will have to insure it himself or
b) Accept a Company car and incur a benefit in kind of £2400 pa
Assume a 40% tax payer and he pays for his own fuel the car is about £30k but the figures I have say the BIK is £2,400 pa
Guidance sought please, feel free to ask any questions
a) Take a £300 taxable car allowance from the Company and PCP a car at £500 a month plus he will have to insure it himself or
b) Accept a Company car and incur a benefit in kind of £2400 pa
Assume a 40% tax payer and he pays for his own fuel the car is about £30k but the figures I have say the BIK is £2,400 pa
Guidance sought please, feel free to ask any questions
The BIK costs him £960 in tax over the year and he has no further outgoings.
The allowance gives him £174 net to which he must pay £500 for the PCP which equates to a monthly shortfall of £326 and an annual £3912. The cost of insurance is to go on top.
So the only way of making up the shortfall of £2952 is by any profit made on business mileage allowance payments - so I would suggest that unless he's getting close to 10,000 miles @ 45p this is a complete no-brainer.
Take the company car!
David
The allowance gives him £174 net to which he must pay £500 for the PCP which equates to a monthly shortfall of £326 and an annual £3912. The cost of insurance is to go on top.
So the only way of making up the shortfall of £2952 is by any profit made on business mileage allowance payments - so I would suggest that unless he's getting close to 10,000 miles @ 45p this is a complete no-brainer.
Take the company car!
David
Sorry I should have made that clearer the £2,400 is the tax payable not the BIK so by my reckoning the shortfall is £1,512 plus the cost of the insurance
Good point re the Business mileage but he still need to deduct the cost of the fuel to calculate a profit and then there is servicing and consumables tyres etc !
Good point re the Business mileage but he still need to deduct the cost of the fuel to calculate a profit and then there is servicing and consumables tyres etc !
HIS LM said:
better
Define "better"?£300 allowance against at £30K car is ridiculous. It should be more like £750.
Use http://www.cashorcar.co.uk to make a comparison.
Gassing Station | Finance | Top of Page | What's New | My Stuff