Company car allowance - how does it work?

Timberflake1983

Hi all, I've just been offered a new job and as part of the package I receive a £5k car allowance, but I'm not entirely sure how this works:

1. Will I have to pay tax on the £5k? Or only if I choose a car over my allowance?
2. Will I have to use the companies chosen provider to get the car?
3. Is there usually an option to take the cash rather than the allowance (I know this would then be classed as taxable income)

Dazed_and_confused

It is really just (taxable) salary but commonly salary which you don't accrue any pension rights on.

1. Yes, and national insurance as well
2. Depends on your company policy
3. It is cash, what did you think you were getting?

LilElvis

Dazed_and_confused wrote: »

It is really just (taxable) salary but commonly salary which you don't accrue any pension rights on.

1. Yes, and national insurance as well
2. Depends on your company policy
3. It is cash, what did you think you were getting?

As above. And the employer will likely reimburse business mileage at a lower rate as they are already compensating you for the depreciation, servicing, insurance etc by giving you the cash allowance. If the allowance is a one off payment it obviously isn't going to be as good a deal as a £5k annual allowance (usually divided into monthly payments).

Timberflake1983

I didn't know whether I'd have to pick a car from them and never actually see the money in my account.

The thing is we have a 4 year old car which we took a loan out for just over a year ago so ideally I'd just use the allowance to pay the loan, would that be allowed?

getmore4less

No one can know the companies policy if they don't know the company.

Even then most won't have a clue.

JReacher1

It would depend on the job. If you're a salesman etc then they may insist on you having a car of a certain value/standing to impress clients.

Normally though you've got an extra £5k a year and you'll be able to do what you wish with it.

Timberflake1983

This is what I was hoping, it's not a sales role, and I'll be on the train to see clients most of the time, the car allowance was there to merely top up my salary.

We only got a car on finance last year so was hoping it would just be as simple as putting the car allowance towards that, hopefully that will be the case.

Timberflake1983

The company have confirmed I can do what I like with the allowance which is great news for me!