Discussion of company car versus car allowance is a subject that attracts a lot of attention including motoring bodies like RAC but what does it mean for members of the ICAEW.

As a member of the ICAEW with a car allowance you need to decide whether to opt out or to stay in the company scheme. There are pros and cons to both choosing a company car or car allowance and opting out of a company scheme. We’ll take a look at all sides and options available so that you can decide what would best suit you and your situation. 

What are the main advantages of a company car allowance scheme

Many people decide to opt for a company car because they think it will take away any hassle and stress because the company will be responsible for insurance, breakdowns, any repairs, servicing, and MOTs. You would also usually be able to upgrade your car every three or four years.

However, opting for the car allowance instead means:

• You will have more freedom of choice and flexibility when it comes to which car you can choose.
• You can sell your car to upgrade it or simply because you fancy a change at any time you like.
• You can decide whether to buy or lease your car, and you will be free to make any modifications if desired.
• You may pay less tax than if you had a company car.

 What are the tax implications of opting out of a company car scheme?

If you drive a company car, you will pay the benefit in kind (BIK) tax. BIK tax is calculated primarily on fuel type, CO2 emissions, list price, its range (electric cars), the cars availability during the year, and the list price of the car. You can work out BIK calculations on the HMRC website.

This information should also be freely available from other sources. There is also a lot of information on the ICAEW website on this subject.

If you decide to opt for a car allowance instead of taking a company car, the allowance will be added to your annual salary, and you will be taxed in line with your personal income tax rate. For many people, this may be the cheaper option.

As car tax calculations are now primarily around CO2 emissions rather than business mileage, if you opt for an environmentally friendly vehicle or one with a smaller engine, you may make significant savings on your tax.  

As a member of the ICAEW, will my choice of cars be limited in a company car scheme?

While many companies do try to offer as much as possible in the way of flexibility and choice within a company car scheme, you will still have much more choice if you take an allowance and can then choose any car you like. Some companies may offer only a small choice of vehicle makes and models, fuel types, and CO2 outputs.

Even if you opt for a car allowance, you will still have to make sure the car you choose to buy or lease is commensurate with your position in the company; there may be rules in a company policy that you will have to abide by, so this is worth researching before you make any decisions.

What happens if I leave my job and have a company car?

If you were to leave your job while you have a company car, you would simply hand it back when you leave, as you would a company issued laptop or mobile phone.

Many people consider this a benefit as they wouldn’t have to worry about continuing to pay car costs, especially if the reason for leaving was redundancy. Obviously, if you were to take a car allowance and had either bought or leased a car, you would still be responsible for the costs of this even if you no longer had a job and salary coming in.

Tyson Cooper can help

As part of our Partnerships scheme, Tyson Cooper can access exclusive discounts and special offers for member of ICAEW so get in touch if you need help sourcing your new car especially those considering electric or plug-in vehicles.

Why not get in touch and find out more.