Company Car Users

Does anyone use a company car and why?

Possible positive reasons...
1) reduced income... (100K thresh-hold, child benefit)
2) simplify finances & expenses
3) reduced company car tax for hybrid


Negative reasons??
1) Loss of No Claims bonus

[JRCT]

Does anyone use a company car and why?

Possible positive reasons...
1) reduced income... (100K thresh-hold, child benefit)
2) simplify finances & expenses
3) reduced company car tax for hybrid


Negative reasons??
1) Loss of No Claims bonus

I had a company car in my last permie role. The reasons for this were that, firstly, it came around at a time when I needed to buy a new car. Also, I would never buy a brand new car myself so I thought it was my only opportunity to indulge myself and get one.

The other reason was that all I had to worry about was putting fuel in it. Anything else regarding tax, insurance, maintenance etc was taken care of.

For the record, there is no loss of no claims bonus. After 4 years of having a company car (and buying my own again), I got the lease company to send me a letter confirming I'd made no insurance claims, which my insurance company happily accepted.

[TheFaQQer]

For the record, there is no loss of no claims bonus. After 4 years of having a company car (and buying my own again), I got the lease company to send me a letter confirming I'd made no insurance claims, which my insurance company happily accepted.

When I left my permie role that gave me a car, the letter said "we have no record of any insurance claims over the past six years".

I suspect that was due to them (a) self insuring so the company paid out rather than having an insurance policy; and (b) they had crap records.

[Craig at Nixon Williams]

Company cars are great for employees because they only pay the BIK tax and fuel – the cost of the car plus servicing and maintenance, insurance etc. are met by the employer.

If you are also the employer (if you are the shareholder of the company providing the car) then in most cases it is not worth it. A few reasons for this:

• You will pay income tax at your marginal rate on the BIK (as you would if you were a regular employee) however the BIK will in turn push more of your dividends into the higher rate band.
• Your company will need to pay Class 1A NIC at 13.8% of the BIK value of the car.
• In addition to the cost of the car the company will also pay for servicing, maintenance and insurance. The first two are not an issue but the amount that you pay to insure a company car is likely to be significantly higher than what you pay currently.

You are correct in saying that the tax will be less on a hybrid car, however the goalposts to qualify as low emissions are moving – so what may be considered low emission today may not be by next year.

I would recommend going through the figures with your accountant before making a decision on this.

Hope this helps!
Craig

[CoolCat]

In permie land a company car can have consequences other than strictly financial.
For instance I've had lease companies put cheap and nasty replacement tyres on when I would have had known brand tyres if I owned it. If the car came out of a pool, rather than getting it from new, then you can end up with a car without an MOT without even knowing it.
I've seen big companies call in employees to a remote office and make them redundant (as a surprise). These poor folk had their company car keys taken off them there and then. They were forced to put the contents of the car into plastic bags and then make their own way home from an office often hundreds of miles away from their home address. Rather an unpleasant experience made even worse by being stranded with no transport and lots of junk from the car. The experience was much better for those taking the car allowance and owning their own car.
As for non claims, if the company claims for a small scratch that you would have ignored on your own car, then you will have a claim against you that most car owners would have avoided.
Of course if you own the company you have a lot more control.

[ContrataxLtd]

Company cars are great for employees because they only pay the BIK tax and fuel – the cost of the car plus servicing and maintenance, insurance etc. are met by the employer.

If you are also the employer (if you are the shareholder of the company providing the car) then in most cases it is not worth it. A few reasons for this:

• You will pay income tax at your marginal rate on the BIK (as you would if you were a regular employee) however the BIK will in turn push more of your dividends into the higher rate band.
• Your company will need to pay Class 1A NIC at 13.8% of the BIK value of the car.
• In addition to the cost of the car the company will also pay for servicing, maintenance and insurance. The first two are not an issue but the amount that you pay to insure a company car is likely to be significantly higher than what you pay currently.

You are correct in saying that the tax will be less on a hybrid car, however the goalposts to qualify as low emissions are moving – so what may be considered low emission today may not be by next year.

I would recommend going through the figures with your accountant before making a decision on this.

Hope this helps!
Craig

Hi Craig

One easy way to avoid this is to still insure the car personally thus utilising your own no claims bonus as most insurance companies allow this these days.

Yes it does have some disadvantages, it has to be grossed up through payroll or P11d's depending on how it was paid but the additional tax on this can be avoided in most cases for contractors. Likewise, if you have to pay an excess on the policy in the event of a claim it has to be done personally or grossed up but these are normally far outweighed by the saving on the premiums!

Obviously every situation has to be considered on its own merits but doing this can often make a big difference to the calculations, although unless the car is extremely low emissions (and the goal posts are always moving as you stated) then it's be inclined to avoid a company car for the typical contractor.

Martin
Contratax Ltd