Confused about tax re car

blackangeluk

Not sure if this is the right board, but I will post anyway.....

Dh has been offered job with a £500 car allowance, they have told him he doesn't have to buy a car with it etc and can use it as he wishes. What are the implications of this tax wise? Is it a good or bad idea? Our plan was to use it to pay off debts but we are unsure whether it is a good or bad benefit.

Can anyone help?

Bean_Counter

Car allowance will be subject to PAYE & NI in the same way salary would. Effectively just add to salary for tax effect.

In terms of whether it is a good idea or not, are there any alternatives such as a company car?

blackangeluk

Hi, there is no offer of a company car. The choice is use it to finance your own car or do what you like with it. We have two perfectly good cars as it is and would prefer to pay the debt off with it, just wasn't sure if it was treated differently to his wages for tax purposes?

Thanks for your help

Bean_Counter

No real difference from a tax point of view (although probably not eligible for pension contributions relief.)

If the offer is car allowance or nothing, then car allowance it is.

Does your husband do any business miles? You might just want to make sure in husband terms & conditions that there is nothing about having to have a car less than four years old (for example), having to be insured for business use etc just to on the safe side.

Failing that, then use it as you please.