What Car? Q&A - Do I need to pay benefit in kind?

Q: I'm a novice in the company car arena and have just been offered a car, cash or a PCP loan with a specific company. I am currently looking at a PCP deal instead of the car, but during my chats with the deal broker, he keeps referring to a 'benefit in kind' payment that I can bolt on to my monthly car budget. He suggests my available spend will be my car budget minus 41%, plus this benefit in kind. Does this sound correct?
Dan Coen

A: If you don't have a company car at the moment, the answer is no.

Benefit in kind is the tax you pay if you have a company car.

So, if you don't currently have a company car, there's no point adding this tax payment onto your budget for the PCP loan. You're not paying it now, so it's not additional money that will suddenly become available if you decide not to go with the company motor.

If you were opting out of a company car and taking the cash or loan route instead, it would mean extra money in your wage slip every month that you could put towards a car.

Assuming you're a higher-rate tax payer, you're perfectly right to be deducting 41% from the cash offer your company's put on the table, though. Your basic income tax rate is 40% and the National Insurance Contribution rate is 1%, which also have to be taken into account - just don't add on that benefit in kind payment to it.