Company Car Tax

love2learn

Hi,

I have a question about Company Car Tax. I will receive just over £8,000 per year as an allowance to either use to rent a company car or take as the same cash alternative (with tax and ni deducted).

I've had a look at the terms of the car scheme on the companies intranet.
It states "Your gross amount (car allowance) will be used to rent your chosen car up to it's value per month. Where this is less than your gross allowance you will receive the remainder paid as a supplement into your monthly salary. (This supplement will be taxable and ni'able).

To me that looks like only the remaining money left over from my allowance will be taxed?
But at the same time I read that renting a company car is a taxable benefit?

I'm confused....

pjclar02

Basically, if you get paid a car allowance, you will receive £8k as gross income through payroll, subject ti PAYE and NIC. The net balance can then be used to rent a car - anything not spent on a car you can keep presumably. The car will be your car in this instance.

If the company provide you with a car, it will belong to them and be taxed as a benefit in kind for you depending upon the CO2 emissions of the car.

thenudeone

So your choice is:
£8k allowance paid in cash, taxed in full under PAYE
OR
Car provided by company, taxed in full under (complex) company car rules
PLUS Balance of the cost paid in cash, taxed under PAYE

The choice is similar to anyone else offered a cash alternative and will depend on your car usage (both private and company) and more specifically the car you choose and its emissions / CO2 banding.

For example if you travel to see a relative on the other side of the country every weekend, a company provided car (with unlimited personal mileage) will be worth a lot more to you than someone who lives 5 minutes away from work and has little private mileage; whereas the cash alternative would be worth the same to both of you.