New Salary with car allowance 5 December 2022 at 5:13PM in Employment, jobseeking & training 15 replies 553 views

DullGreyGuy

Dazed_and_C0nfused said:
Although to compensate for this the car allowance isn't pensionable so you avoid pension contributions on that part of your pay.

Not sure part of your salary being non-pensionable is ever compensation, especially when you get 14% into your pension for your 5% contribution (using OP's figures).

London loading, flexible benefits, car allowances etc are all ways for companies to claim a high total reward package whilst avoiding pension contributions.

Dazed_and_C0nfused

DullGreyGuy said:

Dazed_and_C0nfused said:
Although to compensate for this the car allowance isn't pensionable so you avoid pension contributions on that part of your pay.

Not sure part of your salary being non-pensionable is ever compensation, especially when you get 14% into your pension for your 5% contribution (using OP's figures).

London loading, flexible benefits, car allowances etc are all ways for companies to claim a high total reward package whilst avoiding pension contributions.

No, it's not good for pension purposes but is one less deduction from the amount paid 😊

LadyEE123

So I think it will be lumped into my monthly salary. Meaning it won’t be paid as a BIK. 

DullGreyGuy

LadyEE123 said:

So I think it will be lumped into my monthly salary. Meaning it won’t be paid as a BIK. 

Correct... BIK is a "benefit in kind" so a benefit from employment that isnt cash. A car allowance is cash so not "in kind" and so outside BIK. In Kind are things like company cars that you can use for personal use, private medical insurance etc. These arent cash and so without BIK rules would go untaxed. 

tizerbelle

The car allowance will be listed separately on your pay slip from your salary.  Both will be gross payments subject to tax and NI.  It will be listed separately so that 1) they can show they have paid it 2) so it doesn't get included when working out your pension contributions (or bonus per the extract above) and 3) to ensure it can be coded to the correct nominal code in their accounting software. 

The private medical insurance, depends how they handle it.  Some employers will operate "payrolled benefits" for medical insurance and other benefits and you pay any tax liability each month in your pay.  If its done the old fashioned way though, it will be reported to HMRC on your P11D at the end of the tax year so effectively you won't start paying for it until the next tax year.