£100k+ Taxable Pay, Tax Free Allowance & Car Allowance

Mark1207

Hi all,

I'd like to understand how a car allowance affects the tax free allowance of someone who earns more than £100k.

A person's tax free allowance goes down by £1 for every £2 above £100,000.

As a simple example, if someone has a salary of £105k plus £10k car allowance, is the reduction in tax free allowance calculated based on £105k or £115k (so £2.5k or £7.5k reduction respectively)?

I understand that any car allowance is subject to income tax and NI, it's just the impact on tax free allowance that I'm looking to understand.

Many thanks in advance!

TadleyBaggie

Treated the same as regular income I believe.

Veteransaver

TadleyBaggie said:

Treated the same as regular income I believe.

Car allowance is just regular income. The only reason the employer calls it car allowance is because they don't count it as pensionable, or relate it to Bonus %, or if working out a redundancy payment etc.
From tax perspective it is simply income.

MetaPhysical

Yes it's just income from HMRC's perspective, you pay tax and NI on it .  And be aware that it can push you over the £100k threshold.

Mark1207

Great, thanks all!