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I have been offered a job that comes with a car/travel allowance of £5000 pa included on top of my basic salary.
My role will be primarily office based with maybe 3-4 days a month spent out of the office and it would be up to me the type and price of any vehicle that i purchased.
Am i right in thinking that this benefit would just be taxed at the same rate as my basic salary? Are there any other tax implications? Could this cash allowance be listed as a P11D benefit? Is there a tax effective way to handle these things?
Thanks
Phil
I read this as car crash allowance 😆
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For tax purposes it's just part of your salary regardless of what it is called - same tax and NI as any other cash remuneration.
If the £5k takes you over £37,400 you will pay 40% tax on anything above that amount.
Thanks guys - clears that up.
Car crash allowance 😆
if its only 3-4 days month you need a car for company work, just get a hire car and write it of against tax
Yeah normally car allowances are taxed as salary through PAYE so won't be classed as a taxable benefit. It probably won't be counted as salary by your employer though when considering things like pension or bonus if they are based on a percentage of salary (ie it's probably classed as 'non pensionable')
+1 What dicky said.
Our company requires that you "have a car available for business use" to be able to claim the car allowance. This is not strictly adhered to, although public transport and hire car costs can't then be reclaimed. And yes taxed at source, non-pensionable. Will show on your P60 as part of your total earnings.
If you aren't too a young person - insurance premiums are daft for younger dirvers and if you have funds to put a decent deposit on a car, take the money. Taking a benfit in kind such as a company car and a fuel card could still push you into the higher tax bracket. If you can opt out of a fuel card, do it! The fuel card was what killed the company car for me. I calculated that I would have needed to do 14000 private miles a year to break even on what i'd have paid in tax for that card. My then employer had no alternative, so this forced the switch.
It also depends on how generous the company car on offer is versus the car allowance, but doing limited business mileage usually means it's well worth considering buying your own car as it won't devalue due the to starship mileage.
If you choose a company car, you are usually stuck with it for 3-4 years even if it's unreliable, uncomfortable, becomes unsuitable for your needs, ot you just get fed up with it.
Best thing I ever did was getting rid of my company car - it enabled me to buy a decent car with the money I would otherwise have paid in tax. All of a sudden, the IR were paying me money instead of me paying them.
Go to the [url= http://cccfcalculator.hmrc.gov.uk/CCF0.aspx ]HMRC car tax calculato[/url]r. It's something to do with list price and how much private use you get. The figure it spits out is how much you'll have to pay on top of you're normal tax bill. It's not as scary as it sounds, unless you're picking a £15,000+ car. Depending on your income, of course.
You don't have to buy some thing brand new and posh. Get some thing secondhand and save yourself a load of money
The value of the car is irrelevant (unless your employer has placed parameters), as others have said above you simply PAYE as if the car allowance is part of your salary, though mine's shown separately for pension reasons again as outlined above.
Depending on whether or not you receive a mileage allowance as well, and to what value you may also be able to claim tax relief and get a rebate as Spongebob says.
If the £5k takes you over £37,400 you will pay 40% tax on anything above that amount.
I hope your wrong with £37,400 figure and sure you are, if not I'm going to get one huge tax bill.
if you have a commercial, vehicle eg a ford ranger wildtrak {like me) you also pay less tax on the extra 5k, no matter what you earn. Also you can get all the bike in the back plus, haveing a 3.0 tdi in the £200 road tax a year as with a car, of that size would be more like £500 pa.
[i]I hope your wrong with £37,400 figure and sure you are, if not I'm going to get one huge tax bill. [/i]
Not really, you are paying 20% already plus NI at 11% - so 'only' an extra 9%. And if you take the allowance you'll also get business miles (maximum 40ppm for 10k miles pa).
So your not paying 40% Tax then as NI isn't the TAX.
As the others have said - just paid as part of salary but a separate line.
Work out how many business miles you are likely to do and sort out a tax rebate on it. This will then help offset additional tax.
My tax code is currently 1100 thanks to my mileage claim 🙂
if you are a higher rate tax payer and you take the cash the you will be c£500 better off than if you get a £20K car over 3 years. I bought a 3 year old car and I am miles better off, I reckon all in the cost of owning a 3 year old car that was £20K new is under £200 a month excluding fuel, but including depreciation, insurance, tax etc
Thanks guys, the allure of a new car is not that strong with me so am as happy with a oldish car that one with all of the bells and whistles.
I think the idea would be to spend a small amount on a runaround to get me back and forth to work and to stick the bikes in and pocket the remainder.