Car Allowance?

Gimpymoo

Gimpymoo

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Am looking into a new job and the salary package is broke down into salary and car allowance.

Never had a job with "car allowance" paid this way, and just looking for info from anyone who has.

Why separate it out in that way? I assume by doing so they are saying "car is needed"?

My understanding is that they pay an amount on top of the "salary" and that covers any mileage you may incur and negates the need for a company car scheme?

Thanks for any help.
 

Housey

Housey

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Typically paid each month and taxed as normal income. What it covers will vary but in my experience it’s a chunk of cash to fund a car. I would still expect to claim petrol and mileage I’ve never had that included in any of my car payments.
 

Kenai

Kenai

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Depending on how it's paid, it won't necessarily be included for pension contributions, inflation based pay increases etc. Entitlements may also be banded between roles, so even if salaries vary per person, allowances like this may be fixed and amended by role/grade.

Some places may use it as effectively little more than part of a competitive package, others may well expect a car to be used for work and attach conditions to the age and type of car.

I've seen it paid and taxed in slightly different ways too, sometimes purely as additional taxable salary (paye) but also paid 'tax free' at source but taxed via amendment to your tax code, much the same way a company car would be. I don't think it makes much practical difference which way it's done but can look confusing on a payslip.

As Housey says, it'll likely only be for providing a car, mikeage/fuel expenses will be dealt with separately. One thing to bear in mind here though, is because the car is yours, you are entitled to the 45/25p mileage expense rates from a tax perspective. A lot of companies will not pay this rate, you'll get similar expense payments to a company car but you can claim tax relief on the difference between what you get paid and your tax free entitlement if that's the case.

Edit - I've also seen places change policy regarding who is entitled to an allowance/car and remove it from certain roles that are no longer deemed to need to drive as much (rarely though, as it's a pain to do from a contract perspective, consultation periods etc.)
 
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StevieP

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I'm in a similar position to the OP in that my company car is being taken off me and I'm being given a car allowance in it's place - my understanding is that the main difference is that it is not taken into account when it comes to your pension contributions!

Outside of that I'm not sure how (if at all) the tax element differs to it simply being included in your salary!
 

Housey

Housey

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StevieP said:
I'm in a similar position to the OP in that my company car is being taken off me and I'm being given a car allowance in it's place - my understanding is that the main difference is that it is not taken into account when it comes to your pension contributions!

Outside of that I'm not sure how (if at all) the tax element differs to it simply being included in your salary!
Click to expand...
It doesn’t typically.
 

DanTheMan

DanTheMan

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Yeah, it's usually just a way to pay you more without having to also increase all the salary-linked benefits like pension contributions and bonuses.

My wife gets around £5k 'car allowance' but there's absolutely zero checks done to make sure that it's only used for car costs.
 
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