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Compulsive chicken choker
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Discussion Starter · #1 ·
I currently have a company car, leased for me by my company. I pay for all fuel and claim back any business miles at the government rate (11 pence per mile at the minute I think). My car is up for renewal at the minute & because my annual mileage has dropped from 35,000 to around 22,000 I'm considering opting for the "cash for car" alternative, where you receive a taxable monthly allowance for you to buy or lease your own vehicle (in my name). My company still pays the re-imbursement for cash-for-cars at the government company car rate and it is then up to the car owner to clam back the difference between this (11p) and the private rate (around 40p).

Anyone do this? Is it true? How the hell do you do it?

I've done the usual 'net search & I'm still confused.
 

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My name is Martin
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2,636 Posts
Well in theory you're just getting a payrise. Unfortunately for the business use your not going to get the approved 40p rate for using your own car. Obviously the car is subsidised and thats why the firm only wants to pay you 11p.

When you complete your tax return you will need to state how many miles you've done and how much you got paid for them. If you don't do a tax return then download and submit a P87.

So if you did 20,000 miles in a tax year, you'd get paid £2,200 for them by your firm

The tax mans mileage rates are 40p for the first 10,000 miles and 25p thereafter. That means for 20,000 miles £4,000+£2,500 = £6,500

Then deduct from that what you received, £6,500-2,200 = £4,300. This is the relief. Don't get excited though, thats not what you'll get. You'll get a tax repayment on what was your net expense

So if you're a 20% tax payer. £4,300*.20 = £860

If you're a 40% tax payer, £4,300*.40 = £1,720

Is that as clear as mud?
 

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Premium Member
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There is also a new (?) scheme called Salary Sacrifice which I think makes purchasing the car more beneficial for your company.

At present, the 'cash for car' you get, will be taxed at your normal rate.
By using SS the money is taken from you salary before you are taxed, thereby you appear to have a lower salary.
This means your company pays less NI and Tax. They save money, and hopefully will use part of the saving to give you more 'cash for car' than they would have done originally. You win, they win.

Doesnt happy very often, does it? This type of scheme is used by many companies to help boost pension payments, but is relatively new for buying company cars.

You and your employer would need to get some expert advise on this, but it is another option you might want to look into.

Good luck
Dan
 

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The thing that pisses me off about the 40p for the first 10000 miles and 25p thereafter is that the figure hasn't moved for several years! i.e. since those figures were decided upon fuel costs have doubled! - some years ago it was worth opting out of the company car schemes and leasing a car yourself, choosing a diesel for good economy and low fuel costs (HA:wanker:) if claiming the maximum allowance after three years you had built-up enough reserve to partly finance your next vehicle:tup: - no so now:tdown: - you loose most ways. Ask your self a question what does 11p per mile get you (with a 40 mpg car £4.40p for 40 miles) dosen't exactly cover for insurance, maintenance, depreciation and a replacement car 'pot' does it?
 

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Compulsive chicken choker
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Discussion Starter · #5 ·
Thanks, the reason for considering this route was to either get a better car, OR go for something "ordinary" & make a bit of cash out of the deal. The way I had guessed it was:

Monthly cash allowance of £575, which I would pay 40% tax (and 1% N.I?)
Not having to pay company car tax (around £140 per month for my Passat)
The above would give me roughly £475 a month to buy a car.

I do around 16,500 business miles a year (I'm home based). My employer would pay me 11pence a mile for that, giving me £1815. I then assumed that I could claim back on a P87:

10,000 miles @ 29ppm (40 pence minus the 11 pence I'd already claimed)= £2900
6,500 miles @ 14ppm (25 pence minus the 11 pence I'd already claimed)= £910

If what I've put above isn't right then I'm better off staying with a company car, but if it is right it gives a better incentive to buy my own, considering insurance, servicing, tyres etc.
 

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Gary, I'm going to totally ignore the tax benefits here and look at it from a different point of view. My niece went to work for a well known company who didn't supply her with a company car but said " buy a car up to £16k and we'll pay your loan repayments " plus she got expenses paid, don't know at what rate .
She actually listened to me and didn't do £16k on anew car , or even the £16k in total but bought a 3 year old car with low mileage for £10k ( most depreciation had hit hard by then but you still get a 'new' car just cheap ).

All was well for a year until she got made redundant and was lumbered with a car loan and a car she had no real need of...always worth looking at the long term implications of the decisiosn and if the funding situation was to change.
 

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Gary, I'm going to totally ignore the tax benefits here and look at it from a different point of view. My niece went to work for a well known company who didn't supply her with a company car but said " buy a car up to £16k and we'll pay your loan repayments " plus she got expenses paid, don't know at what rate .
She actually listened to me and didn't do £16k on anew car , or even the £16k in total but bought a 3 year old car with low mileage for £10k ( most depreciation had hit hard by then but you still get a 'new' car just cheap ).

All was well for a year until she got made redundant and was lumbered with a car loan and a car she had no real need of...always worth looking at the long term implications of the decisiosn and if the funding situation was to change.
Of course that is a really important consideration in this uncertain economic climate - we are all being told that the UK is just out of reccession (but we all know otherwise don't we?) - getting stuck with a leased or financed car with no income would be a real bummer. I also have a leased company Passat and being a diesel dsg does COST me in terms of personal taxation, I still prefer this option, no servicing to pay for, no tyres to pay for, if the car is off the road for any major reason I get a loaner, fuel (private and work) all paid for on card, no contest as far as I'm concerned - yes, I would like a better spec car, but what the hell!
 
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