Car allowance to company car

At present I receive a car allowance in leiu of a company car. This is treated as additonally salary and usual tax and nic amounts are paid. My company want me to switch to a company car - what impact will this have on my tax? The car in question is an EV so a 2% bik rate, will I simply pay the relevant bik due each month for that car so circa £30-40 per month? I have been told this will be cost effective for me however I just wanted to double check as someone said I may still pay the tax on my current allowance as it is higher than the EV bik value

Hi

The tax due on a car allowance is typically higher than the tax you would pay on a BIK for an EV.

Thank you

 

Thank you, so by switching to the EV company car I will only pay the BIK due on said vehicle?

Hi,

Yes, that is correct.

Thank you.

Hi, I am a little confused as I have seen conflicting information online that suggest you pay tax on whichever is the higher, the car allowance or the BIK. Example, if I could receive £6,000 per annum as a car allowance but opted to take an EV vehicle with a BIK value of £1,500 I would be expected to pay tax on the £6,000 and pay no BIK tax? Can you please confirm? Thanks

Hi J-Dee,
You'll always pay Income Tax and NI contributions on the car allowance.
The car allowance amount is simply added to your salary for tax and National Insurance purposes, and the deductions will be made through PAYE by your employer.
If you choose the company car, you pay whichever is highest between the monetary value of the car allowance or the benefit in kind tax on the company car.
Employees who receive a company car must pay company car tax (Income Tax only) whereas the employer will be subject to Class 1A National Insurance contributions.
Thank you. 
 

I If I have a taxable cash allowance for a car for business and private use, what is the amount I can claim for business mileage? Thanks Paul

Hi,

If you are using your own car for business, the mileage rates can be found here:

Travel — mileage and fuel rates and allowances

Thank you.

This is a really helpful thread. I believe you have stated this by implication. However, please can you confirm. If an employee receives a Car Allowance, is there vehicle(s) not counted as a Company Car? And therefore the advisory mileage rates that apply are those for use of a private vehicle?

Hi Alastair,
A car allowance is just classed as income which the employer pays to you rather than the cost of supplying you with a company car, you are not required to spend the allowance on a car.
The employer may provide you also with mileage allowance payments for your private vehicle, if these are less than the advisory rates, and you are using your own private car for business journeys, then you maybe entitled to claim the difference in advisory milage rates if you meet  certain conditions
Expenses and benefits: business travel mileage for employees' own vehicles
Thank you.