CAr Allowance through PAYE

Being paid a car allowance through PAYE is just additional salary?

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I am being offered a 'car allowance' on top of my salary. 

As this will be paid through PAYE I will be taxed/NI'd on it and therefore it is just an additonal taxed payment to me.  Therefore I add that to my salary and that is in fact my annual salary?

The employer is offering me this like it is some 'benefit' whereas I just see it as additional salary! 

Or am I missing something? 

Replies (13)

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JCACE
By jcace
22nd Mar 2024 16:22

Your salary is your salary and your car allowance is your car allowance.
Holiday pay, pension contributions, overtime and pay rises will probably all be based on your salary. But salary + car allowance will = your taxable employment income (ignoring pension contributions)

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By David Ex
22nd Mar 2024 16:23

wood1e1 wrote:

Or am I missing something? 

Yes. Semantics.

If you are still "a USA based trader" then there may be US tax implications.

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By bettybobbymeggie
22nd Mar 2024 16:36

You're getting the 'benefit' of more money so presumably you'd take this extra money rather than refuse it!

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DougScott
By Dougscott
22nd Mar 2024 16:44

If you "just see it as additional salary" then I would turn it down. Clearly of no benefit to you whatsoever.

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By AK Employment Tax Services
22nd Mar 2024 18:48

The car allowance sits on top of your salary and is often not considered pensionable earnings .

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By FactChecker
22nd Mar 2024 23:38

Broadly agree with everyone ... but would add one caveat (assuming that we ARE talking about the UK not the USA):

* the key distinction (that it is a separate component of your remuneration and may be treated differently to other components - most obviously overtime and annual pay rises), but all this should be made explicit within your Employment Contract TCs.

There's no point in us guessing at the likely impact in each area for you, because your bosses and you may have agreed something different.

Bottom-line?
It is taxable as pay under PAYE (as would be, say, a First Aider's Allowance) - but, unless the contract says otherwise, it will not be treated as part of salary for any other calculations for which salary is an input figure.

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By Truthsayer
23rd Mar 2024 17:18

'Or am I missing something?'

Yes. Advice from an accountant.

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Replying to Truthsayer:
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By FactChecker
23rd Mar 2024 18:21

To be (marginally) fair, OP appears to be an Employee ... so the advice (as I hinted previously but probably too obscurely) should be sought from the Employer, ideally via their HR function, as all answers ought to be within the Employment Contract.

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Replying to Truthsayer:
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By wood1e1
26th Mar 2024 13:52

Truthsayer wrote:

'Or am I missing something?'

Yes. Advice from an accountant.

And a smart answer by the looks of it.

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By wood1e1
26th Mar 2024 13:54

Many thanks for the sensible answers.

Whilst it is always great to earn more, calling something 'car allowance' doesn't seem to benefit me, as it is outside of pension contribs.

But never mind, it as someone said 'semantics'

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Replying to wood1e1:
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By 17RDR12
26th Mar 2024 14:29

wood1e1 wrote:

Many thanks for the sensible answers.

Whilst it is always great to earn more, calling something 'car allowance' doesn't seem to benefit me, as it is outside of pension contribs.

But never mind, it as someone said 'semantics'

It is a benefit when compared with not receiving it

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Replying to 17RDR12:
Melchett
By thestudyman
28th Mar 2024 09:20

That is true.

And pay rises and bonuses are usually based on original salary only. Some companies do this deliberately to reduce bonuses, pay rises and pension contributions paid.

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Replying to wood1e1:
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By FactChecker
26th Mar 2024 15:50

As a broad takeaway, "calling something 'car allowance' doesn't seem to benefit me" is a reasonable summary ... the primary benefits from providing it are intended for the employer.

But (pedant alert), as with all taxation, the specific circumstances will determine whether or not the employee perceives a benefit from it.
For instance, receipt of taxable 'car allowance' doesn't preclude the employee from 'claiming' a 45p/mile (for true business mileage) deduction from taxable earnings; whereas the alternative provision of a company car would prevent that.
[Warning: last para contains many over-simplifications to act as an illustration.]

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