GE Capital. Cash or Car? Choosing what s best for me

Transcription

1 GE Capital Cash or Car? Choosing what s best for me

2 Making the right decision for you Wondering whether you should choose a Company Car or take a Cash Allowance in lieu of a Company Car? Is it time to review the choice you made given the fact your personal circumstance may have changed, your Company Car Scheme and the tax treatment on a Company Car as a Benefit-in- Kind have been updated? This essential guide to cash or car outlines the key factors to consider so you can arrive at the right decision. 02

3 What s the ultimate difference? V No taxable Benefit-in-Kind therefore making your payslip larger You will be entitled to choose a brand new vehicle but you will still be taxed on the cash allowance and pay National Insurance including insurance, road tax, breakdown, maintenance, tyres and servicing and you will have to source, purchase, run and maintain your own car You will not pay National Insurance but you will be taxed at your appropriate Benefit-in-Kind rate 03

4 Company Car Tax explained All company car drivers pay tax on a percentage of the taxable value (P11D price) of their car. This percentage is based on: > the CO 2 emissions of the car (translated into a taxbanding - see below) > the fuel type of the car! Company Car Tax is known as Benefit-in- Kind (BIK) Taxation Benefit-in-Kind CO2 Bands by Tax Year CO2 Emissions g/km 2012/ / / / /17 Zero Emissions 1 to to to to to to to to to to to to to to to to to to to to to to to to to to to to to to and above 0% 5% 10% 10% 11% 12% 13% 14% 16% 17% 18% 19% 20% 21% 22% 23% 24% 25% 26% 27% 28% 29% 30% 31% 32% 33% 34% 0% 5% 10% 11% 12% 13% 14% 16% 16% 17% 18% 19% 20% 21% 22% 23% 24% 25% 26% 27% 28% 29% 30% 31% 32% 33% 34% 0% 5% 11% 12% 13% 14% 16% 17% 17% 18% 19% 20% 21% 22% 23% 24% 25% 26% 27% 28% 29% 30% 31% 32% 33% 34% 13% 13% 13% 14% 16% 17% 18% 19% 19% 20% 21% 22% 23% 24% 25% 26% 27% 28% 29% 30% 31% 32% 33% 34% 36% 04 16% 17% 18% 19% 20% 21% 21% 22% 23% 24% 25% 26% 27% 28% 29% 30% 31% 32% 33% 34% 36% The table features the latest BIK tables set by the Government. These are reviewed annually during the budget. NB: There is a 3% supplement applied to all Diesel cars. This 3% Diesel surchage is removed from April 2016.

5 Calculating the company car option The CO 2 car emissions tax based system has proven successful in encouraging drivers into lower CO 2 emitting cars and car manufacturers have responded by introducing new car models into the market.! Benefit-in-Kind bands are set by Tax Year and can be viewed over four years which helps to predict future changes to your tax. BMW 320d = 109 g/km BMW 520d Efficient Dynamics = 119 g/km Audi A4 Diesel = 119 g/km Ford S-Max DV6 Estate = 139 g/km Example for 2012/13 BMW 5 SERIES DIESEL SALOON 520d Efficient Dynamics 4dr Key Information: P11d: 31,945 CO 2 : 119g/km Fuel: Diesel (14%+3% Diesel surcharge = 17% Benefit-in-Kind) Tax band: 40% Calculation: 31,945 x 17% Benefit-in-Kind x 40% Income Tax 2, p.a. in tax per month 05

6 Benefits and considerations when choosing cash Freedom to spend the cash in any way you want. You can either opt for a less expensive car and take the cash allowance as extra salary, or use the full amount of the allowance for a different type of car. More freedom to choose the car you drive more suited to your lifestyle and personal circumstance.!!!! You will pay Income Tax and National Insurance on your cash allowance. You take responsibility for your own car which incudes initial outlay to purchase a car, road tax, maintenance, breakdown, tyre replacement and servicing. You are responsible for your own insurance for both private and business use which should cover yourself, colleagues and /or customers as passengers. As the car may be used on company business, you must adhere to cash option rules and guidelines set out in your Company Car Policy - this may include stipulation of type and age of vehicle. 06

7 Benefits and considerations when choosing a car A brand new fully maintained vehicle for a fixed monthly cost. No unexpected bills with business and private insurance covered as well as maintenance, tyres, breakdown, accident management, glass and servicing. Peace of mind that if something goes wrong, help is just a phone call away. Ability to predict your Benefit-in-Kind taxation over a typical four year period.! It is important to understand that Company Car tax rates may change over the period you have the car. Please review the table on page 4 which lists the tax rates by year. 07

8 compare with opting for a company car? Calculating the cash option The calculation below provides an illustration of cost considerations when choosing the cash option to fund the same car featured in the company car tax example featured on page 5. BMW 5 SERIES DIESEL SALOON 520d Efficient Dynamics 4dr Based on 40% tax payer Monthly Car Costs** Income Depreciation and Interest Service, Maintenance & Repair Motor Insurance Total vehicle costs ** For illustration only Calculations based on : Depreciation and Interest : Cost of the Vehicle less anticipated future value of vehicle based on 4 years /48,000 miles. Service, Maintenance and Repair : Includes averaged costs for tyres, breakdown, routine servicing and any other adhoc repairs to the vehicle through wear and tear. Motor Insurance : Flat rate across the leasing market Tax deduction : Assumed at 40% for purposes of illustration NI deduction : Assumed NI rate is 12% for 20% tax payers and 2% for all others Gross Cash allowance Income Tax deduction NI deduction Net monthly cash allowance = Net Personal cost to you (or for a 20% tax payer) 20% tax payer) cost to you (or for a so how does this compare with opting for a company car? Net Personal

9 How do they compare in cost? V Monthly company car cost saving for the same model if you opt for company car for the same model if you opt for company car

10 So... what is best for me? My 6-Step Checklist We recognise that drivers will have their own personal and financial circumstances to consider. Beyond the cost, ask yourself key questions around your lifestyle needs in relation to how you use a car, how many miles you will drive and the type of car you wish to drive. Finally, we recommend that you review your decision every two years as personal circumstance, the company car scheme and taxation rules can change. Once you have considered the 6-steps featured on the next pages, you will have the right information to decide what is best for you. 11

11 6-step checklist step 1 List your key requirements when choosing the right option and car for you. LIFESTYLE considerations over a 3-4 year period are key in setting your priorities. step 2 Work out the mileage split between business and private miles you travel each year given that MILEAGE is a major cost contributor toward the running of your vehicle as well as its depreciation. step 3 Does the company car scheme meet your requirements in terms of CHOICE available or does cash give greater freedom? 12

12 step 4 COMPARE cash versus car by working out the likely Net Monthly cash allowance and the Benefit-in-Kind Taxation. step 5 Understand how you will FUND the initial outlay for a car if you were to choose cash, for example; deposit, loan or existing cash funds. step 6 Take into account ONGOING COSTS such as car insurance for business and personal use, tax, breakdown, servicing, maintenance and depreciation costs to ensure you have a true understanding of the financial implications of choosing cash. 13

13 Next steps... Essential Guide to choosing cash or car. For more in-depth information in helping to choose what s best for you, visit No obligation personal consultation For more help and advice please ge.cashtakers@ge.com to request a no obligation personal iquote Online quote and ordering To quote and order a company car GE s online tool makes ordering your next company car quick and simple. Request access by contacting your fleet manager. 14

14 Your online Toolbox for essential driver support Whether you manage your company s fleet or are a driver, Toolbox by GE Capital is packed with essential information, latest guides and tips for the journey ahead. Simply visit gedrivertoolbox.co.uk to find out more. GE Capital Fleet Services Old Hall Road Sale Cheshire M33 2GZ gecapital.co.uk/fleet July 2012 Whilst all reasonable care has been taken in the preparation of the above information, GE Capital or its employees or agents accept no responsibility for any errors or omissions therein. No liability is accepted for any direct or consequential losses arising from the use of this information.