Hi, first post - hoping a few of you folks can share your experience and a little advice with me!
I'm considering a job where there's a company car as part of the package. An opt-out isn't on the table (yet) so I'm trying to understand the financial implications properly so I can go back and negotitate properly.
Car being offered is a Vauxhall Vectra 1.9 SRI (150) Diesel Estate, and the offer states they would cover all the running expenses of the car for business mileage, and I would be responsible for your personal mileage.
First time I've been offered a company car so my head is battered with questions!!!
1. Running expenses.
Typically with a company car offer is insurance for personal usage included? When they say I'd be responsible for my personal mileage is this usually just fuel?
2. Fuel.
The offer is that I would purchase all the fuel and recharge the employer for the business mileage @ £0.14/mile. Firstly, as this is above the 11p advisory fuel rate for this cc engine, can anyone advise the tax implication to me?
With this in mind should I be pushing for a higher rate, especially given that with diesel at £5.77 per gallon based on 43.8mpg (Vauxhall combined rate - 10%) my costs would be just over 13p and if (when) diesel goes to £1.35 per litre (within two months at present) I'd be out of pocket. And that's before working out what the net rate per mile would be after I pay tax if applicable!!! What's the best plan here?
3. Company car tax.
The salary being offered is £36k. Does this mean I'd pay the 20% rate of company car tax shown on the calculator on this site, and that to calculate my final take home I just take this from my net without the car tax? I want to push for a higher salary, but does this mean that I'd be paying the 40% rate because I'd go over the 20% tax threshold?
4. Opt Out
Should I try to get this on the table? Let's say 30k business mileage per year. Any idea of the value I should pitch, or how to determine this?
Any help on the best deal to negotiate from here would be much appreciated!
Cheers,
Rob
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1. Yes, Insurance will be included likewise all maintenance
2 It normally works the other way round - the employer pays for all fuel and you reimburse the employer back at an agreed mileage rate for your private use. Check this with the employer.
3 If you are being offered £36k you will be paying some 40% tax as the BIK from having a car would lower your tax code. Don't worry about 40% tax though, you only pay it on the part that is over the threshold not on all of your salary. I'm glad that I'm a higher rate tax-payer - it means I'm earning the salary in the first place!!!
4 On that mileage I'd stay in the Company car scheme.
Good luck but it sounds to me that you need to do some more research on income tax and BIK etc.
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1) Insurance is included, but check if there's an excess - some companies have high excess or even only insure the cars 3rd party and then expect the employee to pay say £250 or £500 in the event they can't recover the cost from someone else (note that it's "can't recover", not "at fault" - so if someone hits and runs then it could be down to you).
2) I'm not really sure about this, but logically you would have to pay tax on the excess over the approved rate. The rates are reviewed very 6mths and large employers are apparently pushing HMRC to allow them to pay their employees more.
3) Assuming you're just on the basic personal allowance and have no other income you'll end up with approx a zero tax code, and as the 20% band is 0-£36K then you might just escape! As pointed out in the post above, it's only the excess of £36K that is taxed at 40%, s it will be neither here nor there for you.
4) Agree again with the above poster. 30K business miles, plus your private mileage, takes a heck of a lot out of a car. Do some comparisons at www.cashorcar.co.uk but my view was the peace of mind benefit of having a company car is worth at least £100/mth, so you're going to need a big allowance to make that worthwhile. The company can probably lease the Vectra's at quite a good rate and they're not going to want you to opt out if it's going to cost them more. Also, company cars are a really good deal for 20% tax payers - they cost 40% tax payers twice as much.
Opting out makes more sense for 40% tax payers. Two ways of doing it:
1) Fixed monthly allowance, varies a lot, but could be £300-£600 per month. This is effectively added to your salary and then taxed at your normal rate (so watch for breaching that 40% barrier!). On top of that there's usually a business mileage allowance of maybe 15p-20p. As it's your own car you can claim *tax* back on the difference between what you get paid and 40p for first 10K miles and 25p for all other mileage. So for 20% tax payer, getting 15p/mile you would get a tax refund of 5p for 10K miles and 2p for 10K+ (those refunds obviously double if you're paying tax at 40%, but then so does the tax on your monthly allowance).
2) Mileage only - the company may pay you the full 40p for 10Kmiles and 25p for 10K+ and those payments are tax free.
If you're sure of doing high mileage then 2) can work out best, depending on the monthly allowance offer you get. However be aware for both of them that the Government has suggested it might do away with the 40p rate, although there is much clamouring for it to be increased.
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