Step 4: Into Your Car
So now that you know your budget for opting out of a company car you can get started on finding a car to meet your needs and your budget.
You might be tempted to simply take the same car you would have had in your company car plan, and if this meets your needs and budget then that's fine. If not then we have tools to help you.
Our tools let you search for cars by the net spending power of your monthly cash allowance after tax and national insurance contributions and also factor in your requirements for vehicle specifications (doors, engine, gearbox etc) plus standard equipment.
So, now you've chosen your car and you're ready to get motoring.
Whoa! Not quite yet. This time you're taking delivery of your own car. You're responsible for it, you make the monthly payments and if it goes wrong you're the one who'll be sorting it out.
So, when you take delivery of your new car, make sure you:
- Examine the body work - check for pre-delivery damage such as stone chips to the paint or scuffs to the interior, exterior or wheels and tyres.
- Check everything's there - make sure everything you ordered as factory or dealer options has been fitted and double check items such as the toolkit, spare wheel/tyre inflation kit and that you get all the keys.
- Get the delivery driver to show you that everything is working - all equipment, options, lights, in-car entertainment etc, and don't accept excuses that the driver needs to get away to the station to make a train.
- Drive it - and not just to the station to drop off the delivery driver - to make sure there are no obvious defects in the way the car runs.
Don't be afraid to reject the car if there's something wrong or missing - this time it's your money that's being spent.
And remember that delivery is just the beginning.
You're now responsible for insurance, servicing and maintenance, renewing the tax disc, making sure that warranty work is done, that manufacturer recalls are processed and that the car is kept in a roadworthy condition, especially when it's being used on business travel.
And there's one more factor to consider ...
With a company car the taxes are typically computed for you. Your employer sends details of your car to HM Revenue & Customs and they adjust your PAYE code to catch the tax due every month through the payroll.
When you take a cash allowance you will need to sort out the tax arrangements; first job is to tell the tax office that you no longer have a company car, which will increase your PAYE tax code (that's a good thing), as the company car benefit will no longer appear.
The next job will depend on how your employer is providing your cash, for example:
- You get a mileage allowance to cover business travel and this is in line with the full rate of HMRC's mileage allowances; there's nothing more to do.
- You only get a mileage allowance to cover fuel on business travel; then you may be entitled to claim additional tax relief for other costs such as depreciation, maintenance and insurance.
If you are claiming tax relief direct with HMRC under 2. above, you don't have to wait until the end of the tax year to make a claim.
You can ask for your PAYE code to be adjusted at any time during the tax year to take account of your forecast business mileage for the year and get the benefit of paying less tax each month through the payroll.