Car Allowance?

BellaBargains

Can anyone tell me what a car allowance is, and how much it might be, and how you get taxed on it? DH handed his notice in yesterday and has been given and package to stay with his current employer - they said he would get a car allowance but they didn't expand on that and DH didn't ask. I suspect I'm asking how long is a piece of string but any information is more than we've got just now!

thanks

FBThree

I had a car allowance once - it was money in the paypacket and the amount would depend on the employer. It's a taxable benefit so would either get taxed in his paypacket or he'd have to complete a tax form with the P11D info provided by the employer. It was useful when I moved employer - I could say my benefit package was larger and the new employer improved their offer. Other than that I just treated it as money not to be sniffed at (depending on other benefits etc of course).

Zazen999

Hi
My car allowance was either £500 a month plus mileage at 25p/mile; or £300 per month plus mileage at 40p/mile for the first 10,000 miles and 25p/mile thereafter. Business miles only of course.

The allowance is taxable and comes in the monthly wage; and the mileage is claimed on a mileage expense sheet; so that comes in the next months wages.

You need to find out the details of the offer; as companies have differing mileage rates/monthly allowances/agreements on fuel etc; and each has its own implications.

BellaBargains

So would it get taxed at the going income tax rate or is there a tax rate for it (or does it change his tax code). I'm sorry if these are really stupid questions but I'm not very up on this sort of stuff :eek:

BellaBargains

sorry - another wee question on this - the mileage allowance (for business miles) is that just the same as when you use your own car for business and the employer pays you a mileage allowance?

BellaBargains

BellaBargains wrote: »

So would it get taxed at the going income tax rate or is there a tax rate for it (or does it change his tax code). I'm sorry if these are really stupid questions but I'm not very up on this sort of stuff :eek:

BellaBargains wrote: »

sorry - another wee question on this - the mileage allowance (for business miles) is that just the same as when you use your own car for business and the employer pays you a mileage allowance?

Anyone

itsnowtime

With regards to the tax rate he would get taxed at his current rate providing that the annual allowance doesn't take him into the 40% tax bracket in which case you just need to be careful as some of his allowance will be taxed at 40%

The question re mileage allowance yes that is the same. Although I would double check.

I've just come out of a cash option and decided to take the company car as it worked out more cost effective for me - providing I sell my old car!!!

has he got a car option aswell as the cash?

BellaBargains

No, just the cash option. His business mileage wouldn't be vast though, well, I don't think it would be - maybe 5-10000 per year (probably closer to the 5000 but I could be way off mark there. We have 2 cars at the moment so we wouldn't be intending to buy a new car or anything.

itsnowtime

It is likely to work out in his favour.

I would just double check what the car allowance is that he would be entitled to. Mine has ranged from £300per month - £500 per month - however I was then taxed on this amount.

fortunately at the basic rate - although it was beginning to get to the point of 40%.

hope this helps.

fengirl_2

Don't forget that he can reclaim from tax for his business mileage - current rates are 40p for the first 10,000 miles and 25p per mile thereafter.

GARDINER

It could be a flat rate allowance intended to help purchase a car or it could be intended to cover the cost of business fuel or both. Either way when paid it will or should be taxed and Ni'd as salary because it is a 'flat rate allowance'. If the employer then pays a business mileage allowance the same as HMRC'S approved rates 40/25p there is nothing that can be claimed as a tax deduction. If however the employer does not pay for business miles or pays lower than HMRC approved rates then a claim for tax relief is appropriate. Remember for HMRC purposes a business journey that either starts/ends at home attracts tax relief for the whole journey and not just the mileage over and above the ordinary commuting to/from work which is not allowable normally. SEE GUIDANCE ON HMRC SITE booklet 490