Car Allowance 40% Deduction when the car has a 5% BIK Incentive

nicsonian

I am entitled to £525 per month car allowance. My company are advising that I take a company car, rather than taking the money and purchasing my own car. Their reasons being:

• They will have to deduct 40% from my £525
• I will be responsible for insurance, maintenance etc
• They can offer me a top of the range car from their list, which is easier than organising my own vehicle

I have a baby due in January, and none of the vehicles on the company list will be big enough for my 3 kids, buggy, dog etc. Therefore, I have scanned the market and found the Mitsubishi Outlander Phev. Whilst the car is just under £500 per month, I've noted that BIK is only 5% due to it being a plug in hybrid. I've also worked out that my fuel costs will be reduced by approx 70%, saving me about £200 per month currently.

I felt this was a good deal, as it would reduce my tax, save me money on fuel, and provide a car that meets my family needs.

However, I approached my boss today and outlined my plan, he advised that it was at the companies discretion on how much they taxed me, and that even though the car offered a 5% BIK incentive, the company didn't have to accept it as my registered vehicle and I would still face a deduction of 40% from my Car Allowance.

Is this true?

getmore4less

AIUI

IF you take yhe allowance it is taxed/NI at you marginal rate just gets added to Salary.

BIK only applies if the company provides the car. you don't get the money just more tax.

martinsurrey

nicsonian wrote: »

I am entitled to £525 per month car allowance. My company are advising that I take a company car, rather than taking the money and purchasing my own car. Their reasons being:

• They will have to deduct 40% from my £525
• I will be responsible for insurance, maintenance etc
• They can offer me a top of the range car from their list, which is easier than organising my own vehicle

I have a baby due in January, and none of the vehicles on the company list will be big enough for my 3 kids, buggy, dog etc. Therefore, I have scanned the market and found the Mitsubishi Outlander Phev. Whilst the car is just under £500 per month, I've noted that BIK is only 5% due to it being a plug in hybrid. I've also worked out that my fuel costs will be reduced by approx 70%, saving me about £200 per month currently.

I felt this was a good deal, as it would reduce my tax, save me money on fuel, and provide a car that meets my family needs.

However, I approached my boss today and outlined my plan, he advised that it was at the companies discretion on how much they taxed me, and that even though the car offered a 5% BIK incentive, the company didn't have to accept it as my registered vehicle and I would still face a deduction of 40% from my Car Allowance.

Is this true?

If the company provides the car, you get taxed on its BIK numbers

If you buy your own car, the cash the company gives through payroll as a car allowance is taxed as if it was a pay rise, so 40% if you are a HR tax payer.

(backing up the above post, in fewer words.)