Car Allowance and Tax Code

stattman

Hi. 

I've recently given up my Company Car and switching over to a Car Allowance which appears on my pay slip. 
While I had the Car my Tax Code was reduced to take into account the BIK / BIK Value of the car.  But now that I have the allowance the CO2 calcs etc no longer applies. 
So I trying to understand if my Tax Code / Allowance is re-adjusted to give me a higher allowance, on the basis that the allowance is added to my salary and is deduced at Source?  Or, would my allowance reduce as it's still a Company Benefit?  

Thanks for helping
Regards Mark

Dazed_and_C0nfused

Car allowance is essentially just extra salary but usually without the benefit of it counting for pension purposes.

So that should be taxed as normal as part of your monthly pay.

But if the company car is no longer available to you then your tax code should be updated to reflect that.  Assuming the car was available in the current tax year then you will retain a company car deduction in your tax code for the remainder of this tax year, just for a much smaller amount.

stattman

Thanks for the reply. So the car allowance itself should not reduce my Personal Allowance?

Dazed_and_C0nfused

stattman said:

Thanks for the reply. So the car allowance itself should not reduce my Personal Allowance?

Not directly no, it usually money paid as part of your wage.

However it is taxable income so if say it took your adjusted net income into the £100k+ bracket you would eventually lose some of your Personal Allowance because of how much income you have.

But Car Allowance isn't something that in itself need a tax code deduction.