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  • FIRST POST
    Pythagoras
    How much car allowance will I actually get?
    • #1
    • 7th Jun 12, 5:35 PM
    How much car allowance will I actually get? 7th Jun 12 at 5:35 PM
    Hi Everyone,

    I have been offered a job which pays a car allowance in addition to the salary and I have been trying to work out how much I will actually get to run a car.

    I think I have come up with an answer, but I am hoping that someone will be able to tell me if I have worked this out correctly

    The job pays 36k and a car allowance of 3750. In addition to the car allowance I will get 45p for the first 10,000 business miles and 25p thereafter. I will probably do around 10,000 business miles a year.

    As I understand it, the car allowance is treated as additional salary, so of the 3750, I will only get a take home car allowance of 1462 after tax at 40%, NI at 12% and student loans repayments at 9%.

    If I do 10,000 business miles I will also get 4500 on top of this (which isnt taxed?) Assuming actual cost of fuel is about 17p per mile (1700 total) that leaves me with an additional 2800 towards the cost of running the car.

    So in total I will get 2800 + 1462 = 4262 to buy, insure, tax and maintain the car.

    Does that sound about right?

    Thanks for your help
Page 1
    • zagfles
    • By zagfles 7th Jun 12, 5:41 PM
    • 9,436 Posts
    • 7,361 Thanks
    zagfles
    • #2
    • 7th Jun 12, 5:41 PM
    • #2
    • 7th Jun 12, 5:41 PM
    Why do you think you'll pay 40% tax - you won't if the above is your only income, tax will be 20%.

    Other than that it looks right. The business mileage won't be taxed as it's what HMRC allow for privately owned vehicles.
  • Pythagoras
    • #3
    • 7th Jun 12, 9:25 PM
    • #3
    • 7th Jun 12, 9:25 PM
    Thanks for your reply. I think that I may have misunderstood the 40% tax brackets. The HMRC website says that the 40% tax starts at 34370. I took that to mean that I would have to pay the higher tax rate on anything that I earn over 34370. Does this actually mean that you have to pay 20% tax on the first 34370 of taxable salary? i.e. You'd have to earn 42475 (8105 personal allowance +34370) before you start paying tax at 40%?
    • zagfles
    • By zagfles 7th Jun 12, 9:32 PM
    • 9,436 Posts
    • 7,361 Thanks
    zagfles
    • #4
    • 7th Jun 12, 9:32 PM
    • #4
    • 7th Jun 12, 9:32 PM
    Thanks for your reply. I think that I may have misunderstood the 40% tax brackets. The HMRC website says that the 40% tax starts at 34370. I took that to mean that I would have to pay the higher tax rate on anything that I earn over 34370. Does this actually mean that you have to pay 20% tax on the first 34370 of taxable salary? i.e. You'd have to earn 42475 (8105 personal allowance +34370) before you start paying tax at 40%?
    Originally posted by Pythagoras
    That's right it's 42475 ie personal allowance plus 20% band.

    It's going down a bit next year, think it'll be about 41k, as they are increasing the personal allowance again but want to take most of it back from higher rate taxpayers. So you could be over next year if you get a payrise...but you'll only pay 40% on the part over the theshold (and then NI drops to 2% - so you pay 10% more in total)
  • Pythagoras
    • #5
    • 7th Jun 12, 9:42 PM
    • #5
    • 7th Jun 12, 9:42 PM
    Thanks for your help - it makes sense now. It's good to know I'll be able to take home a little more than I initially thought
  • CLAPTON
    • #6
    • 7th Jun 12, 10:01 PM
    • #6
    • 7th Jun 12, 10:01 PM
    and bear in mind that if you pay anything into a pension, that is tax free

    so e.g. if you paid 3,000 into your pension then you could earn 45,475 before being taxed at 40% on the amount over
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