[pjs]

Being lazy I know, but got a fairly simple question.

A friend of mine, takes a very small wage as a director of a modest company. Its not his main job, more of a side line.

I understand that there is a level of pay/renumertaion that below which, regardless of the company car you have, no car tax is due?

Fact or fiction, anyone know?

[E902717]

i'd be interested in that!!

[zedman]

surely its fiction, you pay extra tax on the P11d value and its unrelated to your wage, and even if it was it would take into account the whole income of the individual not just the wages paid by the co. car provider,

happy to be corrected....

[chrisbin]

I believe its £8k

[chrisbin]

Its £8.5k.....

But......that figure has to include the "benefit" attributed to the car as well

6. Most benefits in kind are not taxable on employees whose total earnings,
including benefits, are less than £8,500 per year. However, a few benefits,
notably credit tokens and non-cash vouchers, are taxable on all
employees regardless of the level of their earnings. To determine the level
of an employee’s earnings relative to the £8,500 threshold, the rules in
section 219 of ITEPA 2003 require all benefits and expenses provided to
an employee to be included in the calculation. If a benefit relates to a car
and/or car fuel provided to an employee by a non-cash voucher or credittoken,
both the amount of the car/fuel benefit and the benefit of the use of
the voucher/credit card for expenditure on the car/fuel, must be included
as separate items in the calculation of the employee’s total earnings up to
£8,500

and the other thing to bear in mind is Class 1A NIC's.....

[Em135eye]

I keep the cars and our company separate.

Mention the two in the same sentence and it's tax death.

[M3-FAST]

If you had a standard tax code of say 647L - they you could earn £6470 a year before you pay any PAYE or NI - company also has no employers NI to pay at this level,

However if you add a car into the equation your tax code would change through BIK, and hence tax be payable - If the BIK was say £5000 a year they would only be able to award themselves £1470 a year tax free with any more being taxable as including the car adds up to more than £6470.

There is NO way of getting a tax free car! Most company directors take a small tax free salary and then top up their salary through dividend payments. This means that the only tax paid on that money is corporation tax as dividends do not come off the profits.

If there was a way thousands would be doing it - it stops you paying an employee a small tax free salary and then 'topping it up' with lots of perks such as a car, shop vouchers, etc....

I have always kepy my car 'out of the business' but charge the company back 40p per mile for fuel, etc to help reduce the amount of dividend required each month to fund the car. Makes 11D's etc a LOT simpler!!

[Em135eye]

M3 - same here. Do you know that if you take a passenger(s) if 45p/mile?

Small salary and dividends are the way forward. Keeping a car out of it is too. About time they raised the mileage allowance though - tight bar stewards.

[MIKEYBMW1]

Originally Posted by M3-FAST

If you had a standard tax code of say 647L - they you could earn £6470 a year before you pay any PAYE or NI - company also has no employers NI to pay at this level,

However if you add a car into the equation your tax code would change through BIK, and hence tax be payable - If the BIK was say £5000 a year they would only be able to award themselves £1470 a year tax free with any more being taxable as including the car adds up to more than £6470.

There is NO way of getting a tax free car! Most company directors take a small tax free salary and then top up their salary through dividend payments. This means that the only tax paid on that money is corporation tax as dividends do not come off the profits.

If there was a way thousands would be doing it - it stops you paying an employee a small tax free salary and then 'topping it up' with lots of perks such as a car, shop vouchers, etc....

I have always kepy my car 'out of the business' but charge the company back 40p per mile for fuel, etc to help reduce the amount of dividend required each month to fund the car. Makes 11D's etc a LOT simpler!!

Spot on ,same here.

[gIzzE]

I have just gone back into a company car for the first time in 10 years, well I am keeping my car A6 3.2 petrol as a private car and charging 40p per mile, but Fionas 123d is now a company car, it is only £20 a week in tax so not a problem, doing 20k miles a year, with insurance at £600 and servicing and tyres to be paid for I reckon it is the better way to go. May change my mind and start paying for it, but for now it seems to make sense.

[E902717]

If you have never owned your own car like me (first 2 i did) having a company car is better i do about 25,000 miles a year and i put about £50.00 a week in my car just in fuel which is paid by the company including personal miles.

My car tax is about that a week so i'm miles better of than if I had to buy it myself and maintain it plus buy tyres etc.. I couldn't buy my car for £200 a month.

In my case its just easier to pay the tax and be done with it...Plus its a family business so its my car anyway

[Andrew@DTUK]

Originally Posted by 335diesel

M3 - same here. Do you know that if you take a passenger(s) if 45p/mile?

Small salary and dividends are the way forward. Keeping a car out of it is too. About time they raised the mileage allowance though - tight bar stewards.

Its only 40p per mile for the first 10,000 miles isnt it Matt?? and whats this 45p per mile you mention?

Dividends are the way to go where companies are concerned

[M3-FAST]

yes, and then 25p per mile thereafter.

I had heard about the passenger thing ages ago but forgot all about it. I may have to have a few more 'passenger' journeys me thinks

My accountant also told me that if the 40p per mile does not cover the fuel then you can claim more (up to the amount of fuel used) as long as no profit is made.

[Andrew@DTUK]

Originally Posted by M3-FAST

yes, and then 25p per mile thereafter.

I had heard about the passenger thing ages ago but forgot all about it. I may have to have a few more 'passenger' journeys me thinks

My accountant also told me that if the 40p per mile does not cover the fuel then you can claim more (up to the amount of fuel used) as long as no profit is made.

Funny you should mention that, my accountant rang me a few weeks ago and asked what the MPG was in the 335d, she needed the info to claim the vat back on the fuel id used over the last 5,000 miles even though i didnt have the receipts lol

Handy having dealers up and down the country i need to visit on a regular basis according to my records im never in the office on a tuesday

[rogerxp]

Originally Posted by ABYSSDTE

my accountant rang me a few weeks ago

There's a first for everything I suppose

I'm with you chaps. Low salary plus dividends. Car owned personally.

[gIzzE]

I think unless you take a car that has a low BIK rate, and one that can do at least 40mpg, then there is absolutely no reason to have a company car.

The 535d was a good example of just how pathetic co car tax is, the car was £480 a month and as a co car it would have cost me £640 a month in tax!!
I feel sorry for the guys who don't get any say and have to pay the tax, why would you when you are £200 a month better off buying it yourself, before you have even looked at an allowance or fuel contributions.

We did about 25k business miles last year, half of them in my car and half in my wifes, and to be honest it covers fuel, servicing, wear and tear items and insurance, nothing on the actual depreciation, which is not right imho.
It needs to be 60p a mile now to be fairer and certainly not a 10k mile cap.