Car Allowance - WHAT TO DO??

2

Comments

  • Any
    Any Posts: 7,944
    First Post First Anniversary Combo Breaker
    Forumite
    lisyloo wrote: »
    Can someone confirm for me please, that if you get a car allowance, that you can claim the tax relief if you get paid less than 40p per mile.
    My husband gets a car allowance rather than a company car.
    But gets a low mileage rate (petrol only).

    I thought 40p was for people using their own personal cars and in that case it was meant to cover everything - depreciation, wear & tear, insurance as well as fuel.
    The logic (i thought) is that if you have a car allowance then some of your costs are already covered so they are only paying petrol.

    Could someone please confirm for sure please?
    I think he only gets about 10.5p per mile for petrol which doesn't now coevr the cost but this isn't a big issue as he doesn't do a lot of business miles. The car allowance is really more of a perk/benefit.

    It is only 40p for first 10k miles, then it is only 25p.

    Yes, you are right - allowance is kind of like company car, but you already get taxed NI and tax on the income so for some reason HMRC views it differently to company car.. I don't see sense either (as you get taxed on car benefit as well when you have comp car), but that is how it is.
  • Any
    Any Posts: 7,944
    First Post First Anniversary Combo Breaker
    Forumite
    i have been offered a job of £35K with a £5K car allowance.
    what would i take home after tax with this?

    :j

    Otherwise from April net pay (if you get full personal tax free allowance of £7475 - ie tax code 747L) would be:

    Gross Pay £3,333.33
    Tax free Allowances £623.25
    Total taxable £2,710.08

    Tax due £542.02
    National Insurance £327.72

    Net Wage £2463.59

    Source http://listentotaxman.com/
  • Any wrote: »
    Otherwise from April net pay (if you get full personal tax free allowance of £7475 - ie tax code 747L) would be:

    Gross Pay £3,333.33
    Tax free Allowances £623.25
    Total taxable £2,710.08

    Tax due £542.02
    National Insurance £327.72

    Net Wage £2463.59

    Thanks for the info; how much of this Net Wage would i be allocating to my car?
  • Any wrote: »
    £5k allowance for 25k miles per annum business mileage is normal - and not all that favourable to you.

    On this kind of mileage I would personally defo go for company car - you will be taxed on the benefit and the amount will be dependant on the car you will get (have a look at comcar.com), but all the worry for the car will be with the employer (such as service, insurance, depreciation). You will also get new company car every 2-3 years (most employers do this).

    Fuel - two options - either you can pay back private mileage and not get taxed on fuel benefit, or get all fuel paid by employer and get taxed on it. With 100 miles private mileage per day you will be probably better off with taxed fuel benefit.

    Or you can take the money - it will be taxed at least 20% tax and 13.8% NI. If you get any other benefit or get bonus part of your wage will possibly reach 40% tax bracket. You will be fully responsible for the car costs - service, tyres, business insurance, replacement if off road... This could be good deal if you can have old banger and do little mileage, but with total of 33k miles per annum this will prove expensive.

    Im not being offered an alternative; ie: a company car.
    is there a way i can make this work for me? I have the feeling i may not be getting the best deal out of this negotiating. :eek:
  • Any
    Any Posts: 7,944
    First Post First Anniversary Combo Breaker
    Forumite
    edited 8 March 2011 at 2:19PM
    Im not being offered an alternative; ie: a company car.
    is there a way i can make this work for me? I have the feeling i may not be getting the best deal out of this negotiating. :eek:

    £5k per annum is about £275.80 net. Can you buy, insure and service a car that will do 25k miles per annum for that? Or you will pay more and then you are no longer really on £25k per annum wage.. However if you got a company car, you would pay tax on that benefit, lets say roughly £50? So that makes it to £325.80 to spend theoreticaly for car per month.

    What kind of car do you think you will need to have?

    If you get fuel card then there is no fuel to be taken into consideration, so the £325.80 it is..
  • lisyloo
    lisyloo Posts: 29,583
    Name Dropper First Anniversary First Post
    Forumite
    Yes, you are right - allowance is kind of like company car, but you already get taxed NI and tax on the income so for some reason HMRC views it differently to company car.. I don't see sense either (as you get taxed on car benefit as well when you have comp car), but that is how it is.

    Hi Any - So just to confirm. Are you saying he can apply for the tax relief? on the difference between 40p and what he gets paid up to 10K miles (he does a lot less than that)
  • Any wrote: »
    £5k per annum is about £275.80 net. Can you buy, insure and service a car that will do 25k miles per annum for that? Or you will pay more and then you are no longer really on £25k per annum wage.. However if you got a company car, you would pay tax on that benefit, lets say roughly £50? So that makes it to £325.80 to spend theoreticaly for car per month.

    What kind of car do you think you will need to have?

    If you get fuel card then there is no fuel to be taken into consideration, so the £325.80 it is..


    im not sure yet if there is any minimum criteria for a car. if not ill currently run my current private car for 12 months and save a deposit for a newer car that can take the annual milleage, by then i would have passed my probation period, and also assess the actual annual mileage. so that would leave me at most £275.80 a month - minus current running costs of my current car?
  • jennifernil
    jennifernil Posts: 5,580
    First Post First Anniversary
    Forumite
    lisyloo wrote: »
    Hi Any - So just to confirm. Are you saying he can apply for the tax relief? on the difference between 40p and what he gets paid up to 10K miles (he does a lot less than that)

    Yes, no problem doing that. My husband did this for many years.

    The "car allowance" is just extra salary, all fully taxed.

    The 40ppm is what you are allowed to receive UNTAXED.

    So just work out the miles x 40p, subtract what he has already been paid (presumably taxfree) and claim relief on the difference.
  • Any
    Any Posts: 7,944
    First Post First Anniversary Combo Breaker
    Forumite
    lisyloo wrote: »
    Hi Any - So just to confirm. Are you saying he can apply for the tax relief? on the difference between 40p and what he gets paid up to 10K miles (he does a lot less than that)

    Yes, that is right.
    You need form P87 for that.
  • Any
    Any Posts: 7,944
    First Post First Anniversary Combo Breaker
    Forumite
    im not sure yet if there is any minimum criteria for a car. if not ill currently run my current private car for 12 months and save a deposit for a newer car that can take the annual milleage, by then i would have passed my probation period, and also assess the actual annual mileage. so that would leave me at most £275.80 a month - minus current running costs of my current car?

    Yes, theoretically, BUT - when you run your own car for business though don't forget you MUST insure it for business use. So your insurance should change (depending on age and don't forget to tell them increased mileage).

    As you say - running your current car will give you time to assess and save up. The fact is that 33k per annum is a lot, it means roughly 2 services a year, a set of tyres or 2 a year and extra insurance. It is high mileage for your own car.. So you need to assess it carefully.
This discussion has been closed.
Meet your Ambassadors

Categories

  • All Categories
  • 342.5K Banking & Borrowing
  • 249.9K Reduce Debt & Boost Income
  • 449.4K Spending & Discounts
  • 234.6K Work, Benefits & Business
  • 607.1K Mortgages, Homes & Bills
  • 172.8K Life & Family
  • 247.4K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 15.8K Discuss & Feedback
  • 15.1K Coronavirus Support Boards