Car Allowance

MoneyMoneyMoneyMoney

Hello all.

I get a car allowance from my company which is paid as follows.

£600 per month added to my salary - equating to £7200 per annum.

I am informed by my transport manager that this covers 20,800 miles business travel (10,000 miles at £0.45 & 10,800 miles at £0.25 per mile). Any mileage I do over and above this is paid back at the 25p rate at the end of the year.
The conditions of receiving this allowance is that I must buy a car less than one year old and less than 10,000 miles to use for business. There is no option for provision of a company car.

To me (and I may be wrong) this means that they are basically paying me a mileage allowance in advance rather than giving me a car allowance. I would have thought that i should receive an allowance to buy a car with and get additional mileage rate on top of this. They inform me that this way is far better (for me or for them?) than providing me with a company vehicle, for tax purposes.
I have had a company vehicle in the past and the money lost from my salary in tax was far less than having to buy, insure, maintain and provide fuel for my own vehicle, so I cant see the logic in this statement.

I would be grateful if anyone could throw in their take on this situation. At the moment I feel that it is very unfair. The other guys in the company seem to think that this is correct but it doesn't seem right IMO.

kiddy_guy

Can you clarify - the £600 is for the allowance and for the fuel together? i.e they pay you a total of £7200 per year to buy and fuel the car and that's it?

MoneyMoneyMoneyMoney

Yes, that is correct. £600 per month on top of my salary is classified as my "car allowance" which is to cover 20,800 miles and the purchase of a car and all other expenses.
If i go over the 20,800 miles i get paid an additional 25p per mile for each mile over this limit, paid at the end of the tax year!

ian103

is the car allowance paid with or without tax being deducted. ie do you get £600 in your take home pay?

MoneyMoneyMoneyMoney

the £600 appears in my bank account total over and above my usual salary. I will need to check whether it is tax free or if they pay more in and it is taxed.

Basically I get 600 clear extra in my account.

ian103

a car allowance is normally taxed and then you would get pence per mile driven, i used to get £5000 per annum taxed plus from memory 15p per mile, the mileage was untaxed and I could also claim tax back on the notional rates less what I had been paid at my highest tax rate.

vax2002

You are subsidising your companies poor businesses plan from your wages.

ian103

based on the assumption of 20800 miles, asssuming 17 pence per mile rate and a notional tax rate of 20%, I reckon at most the car allowance is worth £3600 nett or approx 2900 after tax rebate on mileage rate.

Premier_2

MoneyMoneyMoneyMoney wrote: »

Hello all.

I get a car allowance from my company which is paid as follows.

£600 per month added to my salary - equating to £7200 per annum.

I am informed by my transport manager that this covers 20,800 miles business travel (10,000 miles at £0.45 & 10,800 miles at £0.25 per mile). Any mileage I do over and above this is paid back at the 25p rate at the end of the year.
The conditions of receiving this allowance is that I must buy a car less than one year old and less than 10,000 miles to use for business. There is no option for provision of a company car.

To me (and I may be wrong) this means that they are basically paying me a mileage allowance in advance rather than giving me a car allowance. I would have thought that i should receive an allowance to buy a car with and get additional mileage rate on top of this. They inform me that this way is far better (for me or for them?) than providing me with a company vehicle, for tax purposes.
I have had a company vehicle in the past and the money lost from my salary in tax was far less than having to buy, insure, maintain and provide fuel for my own vehicle, so I cant see the logic in this statement.

I would be grateful if anyone could throw in their take on this situation. At the moment I feel that it is very unfair. The other guys in the company seem to think that this is correct but it doesn't seem right IMO.

If you are being paid £7200p.a. extra then this should be subject to NI & tax as per part of your salary. (and the employer should be paying thir employers NICs too!)

You would be able to claim mileage allowance against your personal tax liability at the rates you specify IF you keep detailed records of the mileage you carry out wholly & exclusively on bahlf of your employers business. Your employer should normally authorise those journeys and the mileage involved.

Yes I think it is very unfair that your employer is attempting to evade PAYE in this way, and drawing you into their tax evasion scheme.

Report the employer using the HMRC hotline
http://search2.hmrc.gov.uk/kb5/hmrc/contactus/view.page?record=tRNNy6edopA