Car Allowance

[Spinal]

Gents; can someone check my reasoning?

My understanding, assuming a £4.5k annual allowance:
£4500 to start
- £1800 tax (@ 40%)
leaves £225 monthly to spend on procuring, taxing and insuring (potentially mot) of a car... that's not a lot...


If we assume tax at £100, insurance at £300 and servicing at £200, that's £175 a month for a car lease; or not a lot of car...

Or have I gotten something wrong?

M.

 

[flango]

No you are bang on, most car allowances I have seen range from £7500 - £12000 per annum based on how senior you are which gives you a little more to play with.

£100 for tax is not a lot and don't forget tyres.

 

[IanA2]

Last car allowance in this house was £8K and that was ten years ago. So £4.5K does seem a bit mean.

 

[Sp!ke]

Is there a company car option?

 

[camerafodder]

Is there a company car option?

They won't give him one in case he goes rallying in Mongolia with it!

 

[isleaiw]

Gents; can someone check my reasoning?

My understanding, assuming a £4.5k annual allowance:
£4500 to start
- £1800 tax (@ 40%)
leaves £225 monthly to spend on procuring, taxing and insuring (potentially mot) of a car... that's not a lot...


If we assume tax at £100, insurance at £300 and servicing at £200, that's £175 a month for a car lease; or not a lot of car...

Or have I gotten something wrong?

M.

if the alternative is a company car then that will cost you as a benefit in kind so if you are trying to compare net positions, you should add back the tax on the car to the amount you have to spend running your own to get to a comparable position.

So if you company car is 16k list and 25% tax rate based on emissions, then taxable benefit will be 4k and tax bill will be 1600 a year (at 40%) - so you should add 133 a month to amount available to spend on your own car to get back to a comparable position.

Ian

 

[Deleted member 6183]

Don't assume the whole allowance will be taxed, there is some relief to be claimed at hmrc rates.
I once worked it out and at lower miles the tax is negligible, assume fuel will be a set rate per mile as well and clever car buying will see you earn a little from this too.

 

[flango]

Don't assume the whole allowance will be taxed, there is some relief to be claimed at hmrc rates.
I once worked it out and at lower miles the tax is negligible, assume fuel will be a set rate per mile as well and clever car buying will see you earn a little from this too.

The whole of the car allowance is taxed at your normal tax rate relief is no longer available, the only relief is on the mileage rate if you employer pays lower than the HMRC rate. I'm currently just looking if to stay out and take the allowance or opt back in to the company car scheme, so far it looks to be a no brainer to take the allowance even with full tax lliability

 

[Spinal]

Is there a company car option?

I'm told there are, but won't see what the options are unless/until I accept the offer.

I needed to make sure I knew where I was negotiating from - was worried that I would say something and be told I was totally wrong.

thanks,
M.

 

[Dryce]

I'm told there are, but won't see what the options are unless/until I accept the offer.

I needed to make sure I knew where I was negotiating from - was worried that I would say something and be told I was totally wrong.

The advantage to the car allowance over a car is that you have more choice.

However. If you are expected to use the car to visit client sites and stick on mileage at your employer's behest then using *their* car may well be a lot more convenient than using *your* car.

OTOH if the car is a perk and not for day to day company business and the allowance is simply extra pay then the allowance gives you more freedom (such as buying a used car, using public transport and beefing up your pension, going to exotic far flung places, etc).

 

[Deleted member 6183]

The whole of the car allowance is taxed at your normal tax rate relief is no longer available, the only relief is on the mileage rate if you employer pays lower than the HMRC rate. I'm currently just looking if to stay out and take the allowance or opt back in to the company car scheme, so far it looks to be a no brainer to take the allowance even with full tax lliability

Agree.

My, poorly worded iPhone, post was meant to convey exactly this message.

No firm I have ever worked for paid a decent allowance plus hmrc mileage rates.

 

[abecketts]

the joys of working for a charity sees my car allowance at the heady heights of £4k, at best you could subsidise something new. In my case I go for bangernomics i could dream of a nice newer R class.....

 

[kianok]

Do they also pay mileage on top?

 

[abecketts]

Do they also pay mileage on top?

yes they do at 26p per mile

 

[SportsCoupeRich]

If this is one of the accountancy firms previously mentioned they generally see this as a way to give you some extra cash. When I was a manager in one if the top firms I got 6k....it was basically just part of the salary package and in no way linked to providing me with a decent car!!!

 

[Rory]

The advantage to the car allowance over a car is that you have more choice.

That's getting less so, especially in bigger firms. Body style and age limits hav ebeen common for years, but firms are increasinly imposing CO2 limits.


OP: To do the maths you also need to know your expected business mileage and what mileage rate the firm pays.

I always suggest that if the "cash or car" calculations comes out about even, then take into account the peace-of-mind benefit of having a company car. I reckon that's worth a good £100/mth.

 

[Palfrem]

Buy wisely - there's some great cheap cars out there.

Consider petrol as the HMRC mileage rate is 24p per mile and you can claim back some tax at year end.

I've had an allowance for years and driven many great used cars.

 

[kianok]

yes they do at 26p per mile

I take it the 26p is for fuel?

You can claim 45p for the first 10k miles and 25p thereafter which makes a huge difference.

Even if your employer pays you less (as in this case) I beleive you can still claim the rest.

Do you have some kind of idea as to how many miles PA you will be covering?

 

[flango]

That's getting less so, especially in bigger firms. Body style and age limits hav ebeen common for years, but firms are increasinly imposing CO2 limits.

I always suggest that if the "cash or car" calculations comes out about even, then take into account the peace-of-mind benefit of having a company car. I reckon that's worth a good £100/mth.

There's a case in court at present on this very subject, employee ignored company policy and purchased a car outside of guidelines which I think was 130g co2, employer disciplined him for it, he took them to a tribunal and eventually court as he reckoned it was against some european legislation and he was free to choose whatever vehicle he wanted and the company did not get a say in it. I think this one is the first of its kind so be interesting to see how it turns out.

Strangely enough £100/month is the price I put on peaceof mind when making the decision company car or not

 

[Stratman]

^^^^ You must remember that Chief Assistants only qualify for a GT. Assistant Chiefs are permitted the Ghia.

Can't have the plebs driving a better car than the boss