How to use car allowance?

Leanne84_2

Hello
I've been offered a new job with a £5025 car allowance. I think after tax, NI and student loan, this wont equate to much. That takes salary to over £40k so I think it will be subject to 40% tax?

I have had a company car for over 6.5 years (4.5 in current job and over 2 in previous) since I graduated. My company can not say about no claims bonus as their policy isn't for me as the driver of my car, also there have been a couple of scrapes and an occasion where someone drove into me.

I need to get a car within the next month and don't know where to start. I've never bought a car and don't have spare money for a big deposit as I am the bread winner in our family.

Should I lease a car or sign up to finance? What is the best way to do this?

Are there any tax breaks / tax to claim back for mileage or running the car?

I don't know whether there are any restrictions on what the allowance can be spent on but I imagine there will be some like it can't be an old banger.

Thanks so much!!:)

jaybeetoo

Your company (or the leasing company they use) should be able to provide a letter with your claims history even if the insurance policy isn't in your name. This would only be worth getting if it has been over a year since your last incident.

Have a look at this guide http://www.hmrc.gov.uk/mileage/employee-factsheet.pdf

Leanne84_2

Thanks jaybeetoo

Does anyone have any advice on the buying of the car?

Nearly_Old

Leanne84 wrote: »

Thanks jaybeetoo

Does anyone have any advice on the buying of the car?

I switched from company cars to taking the car allowance in 2001 and Direct Line accepted a letter from the lease company that no claims had been made.

As for buying a car it would help if you could give a few more details; e.g.
Expected annual mileage - business / private?
Is there a mileage payment in addition to the annual payment?
Do you have any particular requirements; e.g. need an estate?

My experience is that in 2001 I took out a loan over 2 yrs to help finance the purchase of a one year old car and it for 5 years. Financially it was better than the company car as I had a mileage allowance of 40p/mile as well as the annual allowance. I changed cars in 2006 and bought a three year old car with no loan and when I retired in Oct 2011 the total cost was nearly £3.5k less than my car allowance and mileage payments. I've still got the car now just over 10 years old, 115k on the clock, just passed another MoT and still just about "in credit" with it!

JQ.

Don't forget when doing your budget calculations that you will no longer be paying company car tax.

My last company car I was paying £3,120 per year in company car tax, so a significant sum to add to the net car allowance after tax.