Company Car v Car Allowance

Which is better for the individual

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Looking at getting a vehicle supported by the company - company car is relatively straight forward so fine with that but would be interested in people have an opinion of better or worse than an allowance - if I look at a car allowance though (for example 4k-5k) First Question - am I correct that just get put through as normal pay increase so you just pay tax at whatever rate you are on for that amount? Second Question - are you then entitled to claim the £.45p buiness mileage for all business related journeys - is that £.45p subject to tax or do you claim that as an expense at the end of the month? Thankyou for your time applogises if this is a fairly basic question it just everyone seems to have a different opinion!

Replies (5)

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By Paul D Utherone
19th Jun 2017 13:36

If it's a cash sum then it's subject to PAYE and you buy your own car.

If you are running your own car then you claim45ppm on business miles

Thanks (1)
Replying to Paul D Utherone:
By andrew119
19th Jun 2017 13:52

Thanks for the response and business mileage do you receive the full 45p or do you pay some form on tax on that?

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Replying to Paul D Utherone:
By mrme89
19th Jun 2017 15:00

45/25ppm is that can be paid without a tax consequence on the individual.

The employer is under no obligation to pay at these rates.

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By David Heaton
19th Jun 2017 15:47

In the circumstances you describe, the company car is no longer straightforward. If you are offered a car or cash, you have optional remuneration arrangements that fall within FA 2017, sec 7 & Schedule 2. The P11D benefit of the company car will therefore be the higher of the CO2-based % of list price or the cash allowance. That's the number you need to compare with the likely income and costs (acquisition and running costs vs. mileage allowances and taxable/NICable net salary).

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By MJShone
20th Jun 2017 09:42

The reason everyone has a different opinion is that it depends what car you want. You have to work out the net effect of having a company car (so tax on BIK - not forgetting the new optional remuneration rules - and whatever the employer pays for fuel only business mileage, assuming employer pays that - google "advisory fuel rates" for the tax free amounts). You then compare that to the net effect of taking the allowance (so car allowance net of tax and NI, the cost of buying and running the car you want and whatever the employer pays per mile - 45p for first 10k miles a year, then 25p a mile thereafter is tax free). You then have to factor in the "soft" issues eg if your clutch goes in a company car, it's not your problem.

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