New tax code for 2003/4 has landed on the doormat. Although I chose my BMW (company car) with the new tax rules in mind, I hadn't noticed the fuel rules were changing too and the numbers are all a bit scary now.
The car is a BMW 318i Touring Auto with a few extras (leather seats, integral child seats, CD x 6, extra air bags) the CO2 figure is 195. It's a Y reg and has done 18000 miles.
I do like the car, it's comfortable, reliable, we've needed the space from time to time and I admit that I like the badge. It's mainly used for the school/work run and the occasional trip to the Cotswolds. It's been to the south of France once.
But - at the end of the day I am a girl after all and maybe I should just think of it as a means of getting from A to B and 'downgrade' to a different car to save on the tax bill (40%)
So any thoughts about what I might replace it with? Safety and reliability are top of the list of priorities.
Oh and a nice colour of course.
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Was only talking about this last week with my old flatmate (Big 4 Tax Consultant!).
Many of his clients have opted to drop the fuel card as a benefit because the sheer number of personal miles you'd have to be doing to gain any benefit is getting to the point of ridiculous in a high CO2 output car. Failing that the trend is for many execs to swap their petrol 3/5/7 series or Mercs for the equivalent diesel - Apparently the Euro IV compliant Audis are quite popular, maybe something to consider?
What about asking if your company will drop your fuel card and maybe increase your salary marginally? Even without an increase I can't imagine for one moment that you'll not be better off after tax?
I'm going from memory here from a conversation but perhaps a tax consultant is the person you should be talking to about this?
All the best
Dan
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That was quick!
I'm not sure how much a tax consultant will know about cars compared to the collective knowledge lurking on here! In essence I can reduce the tax bill by having a car with a cheaper list price (incl extras), I think this one was £23k ish without the paperwork to hand, and/or by having a car with a lower CO2 rating.
The maths is a bit more complicated when it comes to dropping the company car/fuel altogether and paying for these things directly, but it's my complete lack of car make/model knowledge that has prompted my question.
90% of my journeys these days are personal so I couldn't claim much mileage in expenses. If my sums are right I will be paying £110 a month tax for fuel - that's not far off the actual fuel bill.
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Morethan do a complete car buying package which includes the car, full maintenance and insurance. You just have to buy the petrol. It might be worth seeing what sort of car you could get for reasonable amount of money. This would give you the complete company car package without the associated tax.
teabelly
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I must admit I'm thinking of looking into this seriously when the time comes to change the car, from convenience rather than financial reasons.
Are there any pitfalls?
Brian
Still learning (I hope)
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One thing to bear in mind regarding list prices, is that the figure the Revenue go by is the list price when new, including any extras, so buying a second hand car will not reduce the bill as the Revenue don't care.
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I think I don't understand something...
Unless you are doing a huge amount of personal miles, then the fuel card simply is not worthwhile.
If you gave the fuel card back and then claimed mileage-based expenses you would most certainly be better off.
The fuel card will remain punishingly expensive whatever car you have and so changing the BMW doesn't seem like it would help.
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And given your original comment that you hadn\'t realised that the fuel rules were changing, I cam now completely confused as to whether it is the company car tax which you are bothered by or the fuel tax rules.
If your business mileage is so low, and since you don\'t have a new company car, then you would be massively better off not having a company car or a fuel car at all.
Buying the same car two or three years old, claiming for business mileage when you do it, and having something to sell in the future is by far the most cost effective way.
For a company car to be worthwhile you have to have a mileage sufficiently high that it would destroy the value and reliability of a car if you owned it personally or an emotional wish to have a new car every two years.
If I recall correctly you need to acheive 17,000 personal miles a year for a fuel card to be worthwhile - and I think I worked that out on an E-Class Diesel.
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Well the new fuel rules have prompted me to question the whole lot - I will be paying nearly £4000 a year in car-related tax, so by changing the make/model I could reduce this amount significantly (as a company car) or (subject to the maths) make my own arrangements and drop the benefit altogether.
Still as clear as mud? Sorry for the confusion.
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Assuming a two year lease period....
2 years Car Related Tax not getting money instead of car (cash alternative) = total money being spent on company car
Cost of buying car 2 years tax/insurance & maintenance - amount car can be sold for at end of two years = cost of having your own car
Its pretty simple to see which is more expensive. As I said, if you\'re mileage isn\'t high and if you\'re not bothered if your car is a couple of years old then a company car is totally not worthwhile.
Oh, and make all the calculations at net.
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Rebecca,
If you can live with the size, you could swap for a MINI which will get you all of the safety kit you specify. It's more or less a baby BMW and moreover if you go for a Cooper you can have two colours : one for the body and one for the roof. Gotta make the decision easier.
I'm not sure what the tax is based on now, but if it's:
a) Emissions - why not a Diesel such as a Laguna II (ducks from the howling protests at Renualt electrics). A chap at work has just got one and it's excellent - refined, comfortable and with 5* in the Euro NCAP tests, must be safe too. I'd argue stylish, but of course that's down to personal taste.
b) Purchase Price - A smaller car, but maybe a little more practical is the Ford Focus. If you've got child seats, then a hatchback could be useful the 'child accessories'
Both of these will leave you with a few £££s to spare, perhaps that could be added back into your salary?
Sorry these aren't earth shattering suggestions, just my thoughts.
Lee.
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Your employer must know the sums. First thing to do is to find out what he/they consider the perk to be worth, IMHO.
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First of all, you can still recover the situation for this year. Just pay back to your employer all the private mileage petrol you have used.
Go to HJ's FAQ1, then see entries under BIK (benefits in kind), Cash for Cars alternatives, and Company car etc. I particularly liked the link to Comcar, and the Inland Revenue site.
Some of these links provide a full service for people in your position, eg. HJ says
>> " Cash for Car Alternative to BIK (Benefit in Kind tax): www.cash4carclub.com. ; www.cashforcarclub.com.
Honest's Opinion: This is run by a chap called Nick Moger for whom I have great respect. It gives you the information you need and shows you exactly how to work out your company car benefit in kind tax liability. Also offers club membership at £60 a year, which entitles you to be sourced with a personal lease car at minimum cost with all the figures up-front. " <<
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Well I'm glad this quesiotn has come up. I get a car allowance and run my own car (Omega 3.0) but the company gives me a fueld card for private and company business.
Until now, I have been able to proportion all the bills according to business/private ratio, and claim against tax for the business part. The portion of fuel which is pruvate has effectively been added to my income and taxed at my marginal rate.
No-one told me the rules were changing. I checked out one of these websites, and find that I am probably liable for a tax bill of £4200 for the private fuel. Which is a lot for 7000 miles, even in the Omega.
I will continue to research, but does this mean that the old method is no longer available to me? What abut the car expenses? Can't I claim them any more? (I was always disallowed from claiming by the Revenue mileage method as that included an element for fuel, which was paid for me).
I will look at paying back the private mileage petrol, if that is worthwhile. It's been a great perk over the years, and without it I probably wouldn't have bought a large car and caravan! Ther kids will notice the virtual taxi sign slowly disappearing off the roof too!!
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OK, spoke to the tax office and a tax accountant friend this morning.
I run my own car but have a work fuel card for all petrol. Both sources tell me that ALL fuel card spend goes onto the Income side of my tax form, but I then claim an allowance (.40p per mile for 1st x000 miles, adjusted to take account of any contribution to business mileage by my employer - none in my case). Which is largely unchanged from how I should have been doing it previously.
The lady at the tax office went into a lot of detail, saying although my employer didn't pay me an explicit mileage rate, by paying for all fuel they were paying SOMETHING towards my mileage. Which I suppose is fair.
Anyway, bottom line is that the fuel card scale charges ONLY apply if it a company vehicle.
However, thanks for alerting me to the possibility
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I sent the following info to a colleague in July 2002, after seeing it on this (HJ's) web site:
>>> The bottom line is - you need to be doing a truly huge amount of private mileage for company paid fuel to be a tax efficient option.
You've been given the figures, but to put them in context:
Assume you have a 2000cc company car, the fuel benefit in kind is £4,200. What that actually means is - the Revenue assume the fuel you are provided with for private purposes is worth £350 per month (£4,200 divided by 12). At 40% tax, they will deduct £140 per month from your salary.
For example, I recently completed a Tax Return for someone, he'd chosen a BMW 330d as his company car, sensible choice as it's a lovely car with lowish bik for what it is.
I asked how much private mileage he did (including travel to and from work) About 10,000 miles a year he replied. I worked out the actual monthly fuel cost for that to be about £75. He agreed that was a fair figure. I then pointed out he was paying £140 per month income tax to be provided with £75 worth of fuel. I won't repeat what he said....! <<<
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