Car allowance

[YellsiBabs]

I have just been offered a job with a £400 car allowance. I have never had one or a company car before so unfamiliar with how it all works.

I currently drive a pretty old car.. not a banger, but definitely lacking the mod cons.

Am I expected to upgrade? As in, the money can’t just be kept as additional income… it’s purely for the purpose of a decent car, right?

AFAIK, in terms of using the car for business purposes, I would be expected to get myself to client meetings, work events etc, but I don’t think I would be expected to be driving colleagues or clients, although I suppose this isn’t out of the realm of possibility.

Thanks for the advice

Also if anyone could recommend a nice hatchback sized car with all the nice things like sat nav, parking assist, etc, that fits within my budget for finance (£400 before tax) please send suggestions my way.

Most companies that give a car allowance offer a choice of leasing a car (so you pick a car in that band) or you get the allowance in payroll like your salary (except there are no pension contributions on it) and sort out your own car. I don’t think there’s an expectation on how you use the money, but a past company did not refund employees taking taxis to meetings as we had a car allowance but chose to receive cash instead

Some places will have a contractual requirement that you drive a car of a certain newness. But I’ve not experienced it, and don’t know how it works. I do know with fleet deals that if you leave you can be made to pay the penalty for breaking the lease yourself.

As above depends on contract. However I had this and didn't buy a new car and just treated this like part of salary.

Ok thanks. I am awaiting contract so will see what it says about it.

Most car allowances have options where you can take the cash or get a lease car. I took the car mainly because it reduced my tax amount (I choose an electric car) and was more viable financially

AFAIK, in terms of using the car for business purposes, I would be expected to get myself to client meetings, work events etc, but I don’t think I would be expected to be driving colleagues or clients, although I suppose this isn’t out of the realm of possibility.

You need to check your insurance cover.
Driving to and from work is normally covered under social and domestic cover.
However driving as part of the job would need additional cover, as would carrying work product like samples, ditto for carrying people.

I woke for a company with the same amount of car allowance as you've just said. I used to have a company car through them which was much easier as basically I got a brand new car, and they covered all costs - whenever it needed a service / tyres / windscreen issues etc. My tax code changed to accommodate this. With the company car it had to be changed every 3-4 years depending on mileage due to their lease terms.

I've now got the car allowance since going back after having had a baby and receive the money each month in my pay. My company stipulate however that the car I have has to be less than 6 years old at all times. So I bought a car that was 3 years old so I can get 3 years use out of it. When I added it all up, I basically break even but it means I have to sell the car and buy a new (second hand) one after 3 years. It's a pain, but that's the way they set it.

Make sure you check it out with HR/fleet beforehand to know that you're happy. If there's a probation period they can't usually stipulate the age of the car you drive before passing probation.

Doesn't happen to be a private nursing company does it?

I have a car allowance, our company states it must be of a certain standard to represent the company- however this is interpreted as clean and well maintained, nothing specific on age/model etc. As you’re getting taxed on the allowance it’s hard for the company to be too specific imo, if they wanted that a company car would be better.

Just bear in mind that is you opt for the car, it is likely to cost you a fair whack in tax unless you go for EV.

I have done the maths on this several times and can never justify the car option vs cash, despite it being much easier. We don’t have any restrictions on the car we have instead, except need business insurance if doing anything other than commuting.

I personally think it is just a loophole for companies to get out of paying pension or bonus on an element of salary.

It is to go towards the cost of business use should you need it but can be spent however you choose. Unless you expect to travel a lot it is likely the allowance would be better value for you. Tax liability on a car is usually high.

@mightbeyesmightbeno thanks for the info. Not a nursing company, IT/tech industry x

@ShipwreckSunset As per my OP, I currently drive a pretty old car but I’m overall happy with it and it’s not beaten up or anything, just not modern. So I wouldn’t necessarily opt for a new car unless it’s stipulated that I have to. I imagine, and as PP’s have stated, most companies would set criteria on this to ensure the benefit is actually put towards a suitable vehicle instead of just pocketed as extra income.

And package I have been offered includes pension and bonus as well as car allowance.

@YellsiBabs I think you misunderstand my point on the salary; if the company paid the car allowance as salary, they would have to pay pension and bonus on this cost as well as on the salary they pay so it definitely saves them money instead of just classing as salary.

Also, none of the 4 companies I have worked for where I have received a car allowance have stipulated anything other than needing business insurance on a car, if I had one, and that has only been last company so def worth checking, you may be able to hold onto your current car. IME, It has definitely been a case of treating the car allowance as salary that you can use for whatever, albeit ineligible for pension contributions or bonus from company pov! My ire on this point is directed at companies.

Plenty of people I worked within London jobs got cat allowance and didn’t own any car, but fair to say none of us had much domestic travel.

I did take the car in first job as it was such a hassle free treat, but I think tax rates have increased since then.

Enjoy if you do decide to take the car, it is very nice to have completely hassle free car ownership, although worth checking the details.

@ShipwreckSunset Ah I see what you mean, thanks for clarifying. Hopefully then, when I receive the contract there will be no mention of what particular car I have to have etc and I can carry on with my current car & just keep the extra as top up! :)