Car allowance and mileage

kackah

Hi

I was hoping someone could help me make sense of a couple of queries that I have.

First of all I have just been offered a job with a car allowance. I dont really understand how this will be taxed? Is it added to my basic salary and taxed as a total figure or is it taxed in a different way? I've always opted for the company car and this is all new to me.

Secondly, I've been told that the company only pays 15p per mile and that you have to claim the rest back from the government? Again, I've always worked for places that just pay you a mileage rate.

I wondered if anyone could help.

Thanks

K

OldGreyFox

http://forums.moneysavingexpert.com/forumdisplay.php?f=22

Kiran

The link to the other forum may get you some more comprehensive help, but the jist of it is

1) The amount you get paid in car allowance is added to you salary and you are taxed on it as a combined income. Eg, you earn £10000 and you get a £1000 car allowance, you are taxed on £11000. Your tax code will not be altered as it is with a company car (Everything else being the same)

2) Flat rate mileage that you were talking about before (eg 40p/mile) takes into account wear and tear on your car etc. In your case you have the car allowance which does this therefore the mileage rate is lower. What you can do is at the end of the tax year is claim tax relief for your business mileage (home to work does not count)

HTH