How does a car allowance work

Lea28

My partner has just been given a £250 per month car allowance, can anyone tell me how much we are likely to see of this before it gets taxed away. He earns 20,000 per anum plus car allowance of £3000. Also, do we have to declare this as income for child tax credit purposes.

Thanks

antrobus

Lea28 wrote: »

My partner has just been given a £250 per month car allowance, can anyone tell me how much we are likely to see of this before it gets taxed away. He earns 20,000 per anum plus car allowance of £3000.

The same as if he was being paid £3000 pa for any other reason. Income tax at 20% and NI at 12%.

Lea28 wrote: »

Also, do we have to declare this as income for child tax credit purposes.

Yes.

Lea28

This will make us worse off then, his company said he must use this allowance for fuel, he would normally claim this back through his expenses but he wont be able to with the allowance. By the time he has paid tax and NI on it then the reduction in child tax credit there will be not much left for fuel so infact it will be coming out of our pocket.

CLAPTON

a car allowance and a fuel allowance are different things as fuel used for business travel is a business expense and not subject to taxation
you need to clarify precisely the situation

antrobus

Lea28 wrote: »

This will make us worse off then, his company said he must use this allowance for fuel, he would normally claim this back through his expenses but he wont be able to with the allowance. By the time he has paid tax and NI on it then the reduction in child tax credit there will be not much left for fuel so infact it will be coming out of our pocket.

As the man said, a 'car allowance' and a 'fuel allowance' are two different things. Although they might well be the same thing as far as PAYE is concerned, as in 'taxable'. What does the employer say about it? Surely they have provided some information on the subject.

I believe that if the employer is no longer reimbursing someone for business mileage, then the employee can claim Mileage Allowance Relief. No idea what the tax credit people do about such things.