Company Car vs Car Allowance vs Salary

Wardy1884

Hi,

Looking at a potential ned job which offers a company car or allowance.

My initial thought is I'd rather take straight salary and use my own car but wanted to get some advice on how to weigh up the potential pros/cons of a company car vs allowance.

My understanding is a car allowance vs salary just means the employer doesn't have to pay pensions contribution on an allowance so salary is better.

I'm not so sure how a company car would stack up vs salary and I'm not entirely sure how to compare this. Would anybody be able to advise the questions I should be asking to get the details I'd need to work out what might work out better for me?

Also, if anyone has any general advice of company car vs salary vs allowance, I'd appreciate any thoughts on which option works out better overall (if any)

Grumpy_chap

The choice between company car and car allowance is quite a complex one.

If you take the car allowance, then that amount is treated as additional salary for the purposes of income tax and NI.  It is often not pensionable pay.

If you take the car, the tax is calculated on the value of the car (list price new) and the CO2 rating.  If an EV is offered that is very tax efficient.

To start this assessment, you will need to know, or estimate:
 - How much is the car allowance?
 - How many business and private miles will you do?
 - How is business mileage reimbursed?
 - What would the company car be?  What is the resulting BIK?
 - Is there a fuel card?
 - What restrictions are there on car choice if you take the allowance?

Wardy1884 said:

Hi,

Looking at a potential ned job which offers a company car or allowance.

My initial thought is I'd rather take straight salary and use my own car but wanted to get some advice on how to weigh up the potential pros/cons of a company car vs allowance.

My understanding is a car allowance vs salary just means the employer doesn't have to pay pensions contribution on an allowance so salary is better.

I'm not so sure how a company car would stack up vs salary and I'm not entirely sure how to compare this. Would anybody be able to advise the questions I should be asking to get the details I'd need to work out what might work out better for me?

Also, if anyone has any general advice of company car vs salary vs allowance, I'd appreciate any thoughts on which option works out better overall (if any)

400ixl

Does the company do salary sacrifice on the car allowance for the company car? If so then this means you can take out the company car with non taxed / NI income which can be an advantage. This is different to the traditional company supplied car  (which is old school and many companies have moved away from).

You are correct that car allowance is usually not base pay which is what qualifies for company pension contributions.