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I'm going to take a car allowance instead of a company car, and my employer has given me a couple of options but I'm not sure what my tax liability would be. Can anyone shed any light please?
[b][u]option a[/u][/b] - take the allowance, but company will pay for insurance/maintenance etc. No mileage allowance paid when using car on company business.
[u][b]option b[/u][/b] - take the allowance, pay for all maintenance etc myself, but claim the 45p a mile allowance for using the car on business.
I know that the mileage allowance is not taxable (option b), but do I have any tax liability on option a? It sounds like a benefit-in-kind to me. I'm keen on option a as it would be better for me.
HMRC website is hurting my head, there's no-one at work I can ask right now and I need to make a decision soon.
TIA, sorry for the dull question! 🙂
Option b is taxed as salary - i.e.20% 40% 50% depending on how much you earn.
Option a is taxed as BIK, though not sure what the rate would be.
Taking the allowance in either case is just extra taxable salary, the 45p a mile allowance isn't taxable (AFAIK). It's the company paying for stuff in lieu of paying me mileage that I'm not sure about.
this might help a little 0 it looks like a BIK on the insurance, though the maintenance...?
http://www.hmrc.gov.uk/manuals/eimanual/eim31535.htm
Thanks p-jay. I've fallen foul of the tax man before; my first car wasn't declared on my P11D until a year after I got it, so I had a year's worth of tax to back pay 🙁
Good point re the maintenance, I'll have a word. My thought was to buy an almost new car and an aftermarket warranty (cam, worms, open!) to try and reduce the possibility of huge bills.
Sui - thanks. It's a bloody minefield!