Car Allowance - how does it work

argo82

Hi

I have just been offered a job for £45k per year with a £5k car allowance.

How does that work with regards to tax etc ? Is it basically £50k a year ? Or is there some sort of tax benifit by calling it a £5k car allowance.

Totally confused so any advice is appreciated.

Cheers

CLAPTON

if they give you 5k in cash then it counts as 5k in cash so exactly like salary

angelpie1000

A number of employers will say you have a £5k car allowance, that you can either take in case, or "spend" it on a car from their available fleet.

The tax treatment would differ depending on which option you take:

Taking the cash would be the same as receiving an additional £5k salary and subject to tax and NI in the normal way.

"Spending" it on a car, would result in tax being calculated according to the exact car taken, emissions, etc.

Hope this helps
Karen

Oli_K

I have a similar situation - I have bought a new car for 15k about 3 months ago and have just been offered a job which allows me a company car and fuel card (for private and business miles) or a 6k allowance (500/month). Can anyone offer guidance on what the best course of action is?

a) keep my existing car (though i could get a 'better' car on the scheme) and cover tax, service, depreciation costs etc myself or

b) sell my car (should get about 13.5k) and take up the company car scheme?

I would envision my total mileage being about 20k split 15k business and 5k personal. I would look to take a BMW M3 or similar on the scheme.

I've tried some of the calculators but found them pretty inflexible in that they tend to compare to 'purchasing' a new car through a hire purchase scheme rather than someone already owning a car.

All guidance appreciated!!!

Mickyp

If you had a BMW M3 as your company car you would pay a hell of amount in tax! Personally if you are going that sort of mileage I'd keep your own car and claim the allowance (plus a mileage rate from the company I presume?), like I do!

Oli_K

Thanks Micky. I've tried to do the sums on the M3 but there are many other options available - just liked that one for some reason :rotfl:

I believe its possible to claim on 20k+ business miles.

Mickyp

There is a company car calculator on www.whatcar.com, an M3 will cost: 20% tax payer = £3748, 40% = £7496!

Oli_K

Sorry - might have misled with the car model - was looking at BMW 3 series 320d M Sport, works out just over 2k/year tax. Does that change your view?

Apologies.