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Company Car Tax - Cash or car?

12 February 2007
Woman thinking

Some employers offer the option of a higher salary for you to buy your own car, instead of running one provided by the company. So what are the pros and cons of taking the money?

• You’ll have a much wider choice of cars, without any restrictions from the company.
• As the car you buy is registered in your name, you won’t have to pay company car tax, although you will of course pay income tax on the higher salary.
• If you want to run a car that has high carbon dioxide emissions, you’ll certainly be escaping a hefty company car tax bill.
• Remember that running your own car means picking up the bill not just on the initial purchase price and expected depreciation but also insurance, road tax, fuel, servicing and consumables, such as tyres.
• Balance the costs of, firstly, how much you’d pay in company car tax on the car you want, secondly, how much more the higher salary is worth after tax, and, thirdly, how much your own car will cost to run. This should reveal which is the best option for you.
• To take the hard work out of the sums, try an online calculator, such as www.lvl.co.uk.


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