Cash or Company Car

Designer156

Hi Guys,

I Just wanted to run something past you all to check that I'm understanding this properly...

I currently have a company Car (Honda CRV), it's going back in 10 days and I plan to take the cash alternative - £500pm. As I pay 40% tax, this means I actually get £300pm after tax to buy and run a car. BUT won't I also be paying less tax per month now as I am no longer paying the £2,200pa in tax on a 'benefit in kind'? So, in real terms, my monthly salary will actually increase by £483 each month, not just £300.

Am I right?

BillTrac

Designer156,

your tax code will change to reflect not having a company car, however your total tax will change as you will be taxed on your uplift in income, ie the £500 per month which is treated as income.

I have just joined a company who only do car allowance(having had a company car for over 20 years-no not the same one..lol).

Like you £500 per month. I received my salary notice last Saturday and found my tax code at 22L!!!

Called the tax office who said it was because I had a company car. Told them of the situation and I have been told a new code will be issued asap.

Hope this helps

Bill