I currently drive a company car and as a result my tax code is 36L. I drive approx 30,000 miles per annum and the car is diesel, with carbon emission of 148 and a value when new of £23,000. If I was to surrender the company car, I would be given my flex points, worth 376 pounds per month before tax. Am I financially better off buying a car and claiming flex points and the additional mileage allowance from HMRC, or in view of the high mileage I undertake, continue with the company car? Thank you, Anita
Province/Country relating to question: England
Emailed a friend who is a tax expert, but have had no final reply as yet (now five months)
Thanks for you question
At the moment a deduction of £6115 is being made from your code which equates as a cost to you of £1223 if you are a basic rate taxpayer of £2446 if you pay 40% tax.
If you are paid a payment for car allowance of £376 per month - this equates to £4512 -
If you are a basic rate taxpayer - £902.40 if a higher rate taxpayer £1804.80
Plus you could claim business mileage which is 40p per mile for the first 10,000 business miles and 25p per mile thereafter, which would reduce the charge on the car payment made to you.
You would be better off buying your own car - taking the car allowance, and claiming the mileage rate - however bear in mind any repairs, the tax, the MOT is also a cost for you to bear - !
Thanks for that -
To confirm, I think what you are saying that on an annual basis, in my pocket, my personal tax code is worth (£6115 - £2446) = £3669
And that in my pocket the car allowance is worth (£4512 - £1804.8) = £2707.20
Therefore on an annual basis, using these two figures alone, and after tax, I would be £6376.20 better off. On top of that I could also be claiming 26p for the first ten thousand miles, which after tax is worth a further £1560 and additionally £1320 (after tax) for the other 20,000 miles, so in fuel allowance alone, £2880 after tax for 30,000 business miles. This is £9256.20 per year, after 40% tax!!!
Of course I have the cost of the car to consider, plus tax, MOT, Insurance and repair bills, but even so, I think financially money in my pocket, a company car is crippling me!
I wondered why, despite earning so much more in this job, I take home the same as my old job!!
Thanks for your response
It would seem that the own car method would certainly be of benefit to you - and I assume as you haev stated 26p per mile for the first 10,000 miles, that your employer would make good 14p per mile to you - so yes you can calimj the amount up to 40p per mile.
The car rate - of 6115 for the company car would save you £2446 if you pay 40% tax (6115 x 40%) as this would come out of your tax code
Instead you would pay £4512 x 40% = £1804.80
So you are in fact £641.20 a year better off
Along with this saving to you of £641.20 also you would be due 26p per mile for every business mile (under 10,000 miles you do ) so of you undertake 6000 business miles x 26p = £1560 - so you would be £641.20 + £1560 beteer off = £2201.20 -
26 HMRC expertise, PAYE, Self Assessment ,Residency, Capital Gains, CIS ask for Sam Tax
Wish they would make working out tax more simple!!! It all seems so convoluted and grey to me!!
I total endorse that sentiment ! Hopefully you now have a clear way forward and we are always here at Just Answer - to make light of the grey!