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Thread: Car allowance-how does it work?

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    Default Car allowance-how does it work?

    Been looking around at jobs and been offered a position that could interest me. The base salary is £45k with a car allowance of £4k

    How does the car allowance work? Will I be taxed more then the 40% I'll already be taxed?

    Cheers

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    Moderator & Events Assistant paulhb's Avatar
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    you will be taxed on the £4k at 40% so take that into consideration its not bad if you are going to use your own car back and forth to work not so good if you are going to have to travel lots of miles, there may be a mileage allowance on top, but the £4k is part of your wages a benefit in kind

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    Regular Member Derek Mc's Avatar
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    I opted out of the car scheme and it was a good idea when not doing a huge mileage, but IMHO £4K gross will not buy you a like for like new car in comparison to a company vehicle unless they are going to give you a Perodua!

    I am now wanting to go back in again! finding that tough as employers know the allowance is virtually risk and overhead free.

    I hope this helps your deliberations

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    Regular Member Big Knox's Avatar
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    HMRC will just see the extra £4k as "income" so you'd pay the same take as you would if your base wage was £49k. If your employer pays less than the 40p/25p a mile which they probably will since you'll get a car allowance, you can claim back mileage relief from the tax man each year.

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    Thats what I thought it will just be 40% on 49K and I do not think there is that much driving involved in the job but if there is I should be able to claim back the mileage.

    There is one other thing though if I have a car allowance which in effect makes it a company car does it mean anyone can drive my car? So if I took the money but kept the vectra anyone could drive it?

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    Regular Member MalcGSI's Avatar
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    Nope still only the people listed on your insurance.

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    You will need to change your insurance to include business use, it's not that expensive really but still once you factor in all your costs for ownership service ins tax and all the peripherals it is hard to make anything.
    The final cost is the basic salary of say 45K less the benefit in kind for the company car per annum, then add on the additional £4K net of tax and N.I. from there the mileage is an extra and tax free almost but does need to go a very long way to cover, or so I find.

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    Regular Member rjw's Avatar
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    with my company if we opt into the car allowance, we get on top of that 12p a mile, if we opt out we get 40p a mile, so all depends what mileage your gonna be doing whether to accept it or not

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    Thanks for the answers gives me a bit more to go on

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    Regular Member rjw's Avatar
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    its an annual allowance, so if you were to get a new company car every 3 years, 3x4000=12000 car if you look at it that way

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