Car Allowance gone wrong!?!

scoops_1980

I recently opted out of my company car to receive a car allowance of £450 per month. I estimated after tax that would equate to about £350, but when tax has been deducted I've only come away with £260!?!? I don't claim mileage as i have a fuel card where i pay back my personal mileage at 7p per mile. Where am I going wrong cos I'm down £100 a month on what I thought I'd get???

Thanks in advance for any help on this

sarahlouise210

has your tax code been amended ??? If you still have a deduction in your tax code relating to your company car then you will be paying tax on the company car you used to have and the additional payment you now receive. Your tax code should still have a dedcution for company car (this will relate to the period from April - when you gave back your company car) but the deduction should be lower than it was. Another reason could be...is the additional £450 taking you into the 40% band ???

gizmoleeds

You know, from the company's point of view this is a very bad way of paying you the car allowance. It is perfectly legal for them to pay you it out of your gross pay provided it is done at 40p per mile or less.

markdavey

Hi,

I receive the same allowance and am in the 40% tax bracket. This means that after Tax, you will be left with £270 less NI which is probably very close to the £260 you mention in your post.

You should bear in mind though that the case for receiving an allowance instead of a company car includes the additional take-home pay you will receive once you are no-longer being taxed on the company car. I ended up being better off per month by approx. £460.

I assume that, as you are repaying your private fuel (at 7p per mile), your employer does not declare your spend on the fuel card to HMRC. You should still be able to claim the 40p per mile non-profit travel expenses for each business mile you travel in your own car (up to 10,000 when the amount changes to 25p per mile) through your Tax Return. The car allowance is simply seen as additional income and not related to a vehicle as far as HMRC are concerned.

So, if you travel 9,500 business miles per year, this equates to £3,800 to offset against tax paid.

Speak to your Tax office, although you may have to make a couple of calls until you find someone at the end of the phone with enough knowledge of your situation to help

Cheers

Mark

nej

You may want to rethink the 7p per mile thing as well. When you have a cash allowance and have a fuel card, it works out far more favourably in that the amount that is spent on personal mileage is also considered to be just a cash benefit. Therefore if you are at 40% then you basically get your fuel at 40% of the pump price. If you are 22% then it's only 22% of the pump price.

scoops_1980

Thanks for your help guys - much appreciated :beer: