Car allowance - tax & NI?

watcher27

Been offered a £350 car allowance with my employer, just trying to work out what that actually leaves me after deductions?
I earn £34.5k a year, so 20% tax rate

So is it as simple as £350 - 32% (20% tax and 12% NI) = £238?
Thank you!

Petriix

Get an EV and the BIK is 0% then 1% from April.

Dazed_and_C0nfused

Unless you are Scottish resident for tax purposes then yes it will be 20% tax and 12% NI.

Car allowance is really just salary so there may be pension and student loan deductions as well however some employers will specifically say car allowance is not pensionable income.

watcher27

Dazed_and_C0nfused said:

Unless you are Scottish resident for tax purposes then yes it will be 20% tax and 12% NI.

Car allowance is really just salary so there may be pension and student loan deductions as well however some employers will specifically say car allowance is not pensionable income.

Thanks for that!
Any other deductions I need to be wary of? 

I hadnt initially realised I'd be paying NI as well, and my budget is pretty tight so need to find out exactly how much id be taking home before committing! 

Grumpy_chap

Are you being offered the car allowance instead of a company car?
If so, then you need to consider the saving in the BIK as extra income as well as the Car allowance less tax.
I did an example in a recent thread, I'll try to find it and link.

Grumpy_chap

I found two recent threads on this that hopefully cover your queries.  If there are specific questions after that, then do feel free to return for clarification:
https://forums.moneysavingexpert.com/discussion/6210640/company-car-allowance-tax-etc-worth-it/p3
https://forums.moneysavingexpert.com/discussion/comment/77794261#Comment_77794261

watcher27

Grumpy_chap said:

I found two recent threads on this that hopefully cover your queries.  If there are specific questions after that, then do feel free to return for clarification:
https://forums.moneysavingexpert.com/discussion/6210640/company-car-allowance-tax-etc-worth-it/p3
https://forums.moneysavingexpert.com/discussion/comment/77794261#Comment_77794261

Thanks for your help!
Im in a unique situation I think, which makes it all the more difficult...
Small company (7 members of staff). Boss let my have a company car to help me financially, and specifically let me have a pickup truck & fuel card. So a limited BIK and fuel tax to pay, and I do 0 company miles, all personal. I use it to travel to & from work & is our main family car at weekends etc. Been like this for 3 years! But all good things must come top an end lol
So the boss has retired and sold the business to the office manager. She has always hated the truck as she did the accounts and saw how much it cost etc.
So its now got to go!
In my new contact she has stated that I can have a vehicle up to £350 + VAT a month and keep my fuel card. Or take the money as an allowance and still keep the fuel card
But I have built all my personal finance around the fact that (apart from the tiny BIK payment), I've had 0 travel costs!
So having to pay the BIK + fuel tax on a regular car is just not viable. I do 25K miles a year, all personal so imagine the fuel tax would be quite high... (first world problems I know)
So I was going to take the allowance and get a lease car of my own, an EV as we have free charging at work. 
With the saving im making on not paying the truck BIK (£70 a month) plus the £238 allowance (after tax & ni), I can just abpoit afford a little EV.
Im thinking this is the cheapest way to get a car!
Really dont know what to do though lol

Jeremy535897

You would have to consider the range of the vehicle, unless you do a lot of short journeys.

Grumpy_chap

watcher27 said:

So the boss has retired and sold the business to the office manager. She has always hated the truck So its now got to go!

In my new contact she has stated that I can have a vehicle up to £350 + VAT a month and keep my fuel card. Or take the money as an allowance and still keep the fuel card

I do 25K miles a year, all personal 

So I was going to take the allowance and get a lease car of my own, an EV as we have free charging at work. 
With the saving im making on not paying the truck BIK (£70 a month) plus the £238 allowance (after tax & ni), I can just about afford a little EV.

A change of owner should not force a change of contract, but it sounds as though you are being pragmatic in accepting that.

I have previously taken car allowance plus fuel card and it is a tax-efficient way to have a fuel card.

If you feel that an EV is an option that fits your mileage, would an EV company car be an option?  BIK is currently nil, but will be 1% from April and I think likely to increment up in coming years.

Just to be clear, are you being offered a car allowance of

• £350 per month 
• £350 + VAT = £420
• £350 + 50% VAT (which is the amount the company needs to pay as can usually only reclaim half) = £385

Obviously, if you take a company car, the company also covers servicing, insurance, breakdown etc. so simply offering you the lease cost may not be cost-neutral to the business.  Many companies take the approach of only allowing the lease cost, but that may be a friendly clarification discussion - the new boss can only say no.

watcher27

Grumpy_chap said:

watcher27 said:

So the boss has retired and sold the business to the office manager. She has always hated the truck So its now got to go!

In my new contact she has stated that I can have a vehicle up to £350 + VAT a month and keep my fuel card. Or take the money as an allowance and still keep the fuel card

I do 25K miles a year, all personal 

So I was going to take the allowance and get a lease car of my own, an EV as we have free charging at work. 
With the saving im making on not paying the truck BIK (£70 a month) plus the £238 allowance (after tax & ni), I can just about afford a little EV.

A change of owner should not force a change of contract, but it sounds as though you are being pragmatic in accepting that.

I have previously taken car allowance plus fuel card and it is a tax-efficient way to have a fuel card.

If you feel that an EV is an option that fits your mileage, would an EV company car be an option?  BIK is currently nil, but will be 1% from April and I think likely to increment up in coming years.

Just to be clear, are you being offered a car allowance of

• £350 per month 
• £350 + VAT = £420
• £350 + 50% VAT (which is the amount the company needs to pay as can usually only reclaim half) = £385

Obviously, if you take a company car, the company also covers servicing, insurance, breakdown etc. so simply offering you the lease cost may not be cost-neutral to the business.  Many companies take the approach of only allowing the lease cost, but that may be a friendly clarification discussion - the new boss can only say no.

Well, we never had contracts lol
As I say, its a small one man owned company, who was old and kind. 
A company EV is an option yes, but cutting a long story short, new boss doesn't like me having a company car at all, eveytime I pick one and comes to ordering she makes excuse after excuse as to why not at the moment. It's beyond comical now. For example I have a £350 budget + VAT, I found an EV I wanted, that was £348 a month, she now says its more than her car cost a month so no. In my contract she put she can withdraw the benefit at any time with reasonable notice, so don't want to push the issue or confront her. She has indicated in the past she would much rather I have the allowance.
And I don't want to have something thats will cause her to permanently have a grudge on me, so thats why I going for the allowance. That way, its my car, I can do what I want with it, and I can pick and choose as I want.

Allowance wise, it says £350. So Im taking it that I would pay the tax and NI on that figure, so would end up with £238 extra a month in my pay? I d also not pay the BIK I have been paying on the truck.

Grumpy_chap

watcher27 said:

new boss doesn't like me having a company car at all, eveytime I pick one and comes to ordering she makes excuse after excuse as to why not at the moment. It's beyond comical now. For example I have a £350 budget + VAT, I found an EV I wanted, that was £348 a month, she now says its more than her car cost a month so no.

I have been exactly there.  In a previous job, I had a budget of £300 monthly, found an E-Class on a model run-out deal in budget and then told "no, better car than I have, BMW3 series, what I meant was for you to find a BMW1 series."  Wouldn't it just be easier if the management simply said "you can have this car or an allowance..."

I think you are correct to just go for the allowance and accept that the allowance is £350 per month.

Your calculation of £350 gross monthly allowance working out to £238 extra take home for basic rate tax payer seems to be about right.  Also, Jeremy did not pick that up as incorrect, and I am sure he would have done if the number was miles out.  So, yes £238 plus add on the BIK for the pick-up, which you say is £70 monthly, so that makes £308.

What is the current BIK for the fuel card with the pick-up, or is that included in the £70 per month?  That may enhance your take-home a bit more. 

If you go for an EV, the fuel card is effectively of zero value as I understand electricity provided free at work is not subject to BIK (at present).