Executives with company cars, depending on their salary package, may or may not be put out about the amount of Benefit in Kind they are obliged to pay each year for this perk.
A company director on a six-figure salary and a new S-series Mercedes worth, say £60,000 plus, can expect to pay BIK every year at his highest rate of tax on 30 per cent of the car's original market value. If his annual business mileage this year exceeded 15,000 he would only have to pay 80 per cent of the tax. Another way the bill reduces is to pay your own personal petrol and other car expenses like insurance, tax and servicing charges. Petrol payments will reduce the bill by 4.5 per cent, insurance and servicing by 3 per cent each and tax by 1 per cent for a total of 11.5 per cent.
The person having use of a £60,000 company car, who doesn't drive more than 15,000 miles a year and whose company picks up all his other car bills will be charged a BIK rate of £18,000 or £8,640 when his top tax rate is taken into account. You need to be on a very healthy salary to absorb that annual charge. If a bill like this alarms you, and you also happen to love old cars, you can get your company to buy you a vintage or classic car and virtually eliminate your BIK bill.
Benefit in Kind is based on the original market price of the vehicle. A classic 1960s sports car like an MGB, a Triumph Spitfire or Sprite, or even an E-Type Jaguar, which would have cost between a few hundred and at most, a couple of thousand pounds in the 1960s, translates into a negligible BIK bill.
Mr Karl Tsigdinos is editor of Car Driver Magazine and the presenter and producer of the new RTE Network 2 motor series Drive! which begins next month. "You can buy a classic sports car in excellent, restored condition for between £5,000 and £25,000," he says. "A 1960s Alpha Romeo Spider and even those that were made up to the early 1980s can be had for between £7,500 and £10,000. Buying a newer over an older one has few driving advantages since the design hasn't changed much since the 1960s."
A classic E-Type Jaguar, that may have cost about £2,000 in the 1960s, and in excellent repair, will cost between £20,000-£25,000, he says. The BIK bill, if all your bills are picked up by the firm will be about £288. The equivalent BIK payable on a £25,000 new car is £3,500 per annum.
"The market has collapsed for these cars, mainly because they were totally overpriced in the 1980s, when every young City dealer and banker wanted one for an investment." Prices went up in some case by a factor of 10, says Mr Tsigdinos. "Top Gear, the BBC's car show a few weeks ago reported that one car that was bought for £103,000 seven or eight years ago is now worth just £28,000 . This would be pretty typical of the market at the moment."
Whatever about the Benefit in Kind pluses of buying an old car, they should only be bought, "for your own enjoyment and pleasure," says Mr Tsigdinos.
