Car Allowance, Salary, Pension and Student Loan

.andym

Really struggling to get any solid info on this one so thought best to post a direct question on it myself...

Do you pay pension contributions on Car Allowance?
Do you pay student loan contributions on Car Allowance?
If yes, what’s the point of Car Allowance, why not just add it directly to a persons salary?

Thanks!

James2k

have you tried plugging everything into this and seeing how it affects your take home?

https://www.thesalarycalculator.co.uk/salary.php

Car_54

.andym wrote: »

Really struggling to get any solid info on this one so thought best to post a direct question on it myself...

Do you pay pension contributions on Car Allowance?
Do you pay student loan contributions on Car Allowance?
If yes, what’s the point of Car Allowance, why not just add it directly to a persons salary?

Thanks!

Pension - depends on company

For tax (& NI) purposes, inc student loan, it’s simply part of your salary. Couldn’t be simpler.

Scrapit

.andym wrote: »

Really struggling to get any solid info on this one so thought best to post a direct question on it myself...

Do you pay pension contributions on Car Allowance?
Do you pay student loan contributions on Car Allowance?
If yes, what’s the point of Car Allowance, why not just add it directly to a persons salary?

Thanks!

In practice it is just added to your salary. You'll just get you lump sum take home income with all the required deductions. It's only broken down on the pay slip, as are the various taxes you have to pay.

Bigphil1474

Op, your payslip should break down your in's and outs so that it clearly shows what each element is. Normally lump sum is not taxable at source and is not classed as salary. As it's not classed as salary you don't pay pension on it (I assume you mean works pension). With lump sum, it goes on your P11D and usually effects your tax free allowance at the end of the year. BIK.


e.g. My pay slip says :-


Basic Pay x,xxx.xx
Car allowance xx.xx
Car Mile Ess xxx.xx
Total Miles Paid xxx


For me, the pension payable is exactly 6.5% of basic pay - which is the employee rate for me - so the car allowance (lump sum) and mileage payment isn't included.


For student loans - depends what they ask. If they ask what your salary is, then it doesn't include Lump sum. If they ask your gross income or take home pay then it might. I would be inclined to say not, as it isn't salary, and is paid to cover costs of providing a vehicle.

foxy-stoat

My car allowance isn't included in my pension calculations.

You are taxed and NI'd on all your earnings - a car allowance would be taxed.

Berkshire_Beancounter

.andym wrote: »

If yes, what’s the point of Car Allowance, why not just add it directly to a persons salary?

Thanks!

If car allowance was added to your salary, you'd be paying National Insurance on it. As it's a benefit, you pay tax on the value but not national insurance.

From an employer's perspective, benefits in kind are subject to class 1A national insurance contributions - currently this is the same % (13.8%) as their contributions on salaries / wages. However by making them subject to a different category of NI, I guess the Treasury has the flexibility to change the rates so NI on benefits could be different to NI on salaries.