Company car allowance

Buzzz

Hi
I wondered if anyone knew how the company car allowance thing works?

I know it will vary from job to job, but if offered 10% of the salary, is that generally a year or a one off amount for a period of time? Do you normally have the option to buy a car of your choice, or do you use the money to lease a car from their fleet?

I will get to asking all these questions with the employer, but it's not the right time yet, but I'm keen to know how it works.

Also, any tax implications?

Ta muchly

Buzzz

Anyone please?

k3lvc

Very much depends on the wording of the scheme.

With ours I get the option of a company car from a (very)short list or x% of my salary as a car allowance

I take the x% which is paid monthly in salary and therefore taxable but this leaves me with a nett sum per month that I can invest in a car of my choice (either leased or purchased) from which I have to cover insurance, tax, MOT, maintenance and other running costs.

In addition to allowance the comany then pays me x pence per mile for verified business usage which covers the fuel used plus a bit towards the running costs

In addition to this I can claim a rebate from HMRC for the tax on the difference between my company rates and the HMRC approved mileage rate

My concern in your case is that 10% of salary isn't a lot to be starting with to run a car (mine's almost double that)

All fairly simple if you're organised

bluesnake

I have not had company car for about 20 years, and the rules have changed since then, but what I gave gathered from engineers is that:

There are various schemes. One company's scheme let you choose from a range of cars for which some will give you cash back, other cars break even, and others cost £££ a month. The diesel mondeo estate gave cashback, while another guy had a Mazda rx and that cost money.

One Dell engineer, who Dell actually contract through another company, they paid around 10p a mile which and this did not cover the car cost. Every year the engineers had to individually claim money back from HMRC.

The other think is, if the hire is personal to you via the company, should you leave, or get fired, will you be left paying the lease for the next x years?

One company stated that their employes cars have got to be newer than 5 years.

Best is to speak to one of the current people employed there, and ask him what the best and cheapest deal is.

Bigger the car you get, the more chance that you will both have to do your own job, and deliver oversize parcels too

Buzzz

Thanks Both.

k3lvc - how you describe it is how I imagined it to be, although as you said the detail is in the fine print.

10% of salary wouldn't be too bad if this was paid yearly, although if it was a lump sump to last 3 or 5 years, then no, not much.

How much is the tax if you choose to take the amount into your salary?

bod1467

Buzzz wrote: »

How much is the tax if you choose to take the amount into your salary?

It depends on what rate tax payer you are. The additional income forms part of your salary ... if your gross salary is such that it takes you into the higher rate band then you'll be taxed as normal on the amount that falls into the higher rate band.

In other words - your tax will be your tax; the fact it is for a car doesn't matter.

Buzzz

Thanks all, i've since found out that the car allowance is a yearly amount, paid monthly into the salary which i could then do as I wanted with.

As above, i'd be taxed on this as usual. If that's the higher rate, would this mean that the yearly amount is subject to 40% tax, therefore almost halved before I start?

TadleyBaggie

It will be taxed at 40% if you are a higher rate tax payer.

InsideInsurance

Buzzz wrote: »

Thanks all, i've since found out that the car allowance is a yearly amount, paid monthly into the salary which i could then do as I wanted with.

As above, i'd be taxed on this as usual. If that's the higher rate, would this mean that the yearly amount is subject to 40% tax, therefore almost halved before I start?

Be thankful you arent in the 50% tax bracket then

Its increasingly common to have "flexible" benefits these days with the default being that you get it as cash and you're free to do whatever you want with it but naturally are taxed on it.

On the flip side as it isnt part of your basic pay it isnt factored into to any bonus, pension contributions etc which are all expressed as a percentage of basic salary.

The last time I was Perm had ~40% salary allowance which was great when you got the first pay cheque but you got nothing at all in way of "benefits" or pension other than staff discounts on products/ their suppliers products

Buzzz

Hi II,
I'm not sure what you're saying In your post, can you explain please?

BillTrac

The car allowance generally is shown as a seperate amount on your payslip, well mine does anyway. For tax reasons it will be classed as income. But it doesn't get included in pension, sickness or other benefits which are based on your actual salary. Unless you get an actual salary based percentage as car allowance then any pay rise will not change the allowance.
I can have any car I want except it needs to be under four years old, les than 100,000 miles and not a convertible or three door