When a driver of a company car decides to accept his car allowance offered by his employer, its important at this stage to understand what you can afford and how best to finance it.
If for example you are given a monthly allowance of £500 a month, then subject then you pay tax on this at your highest rate, in the case of a 40% tax payer, you have a net £300 per month. You can check your figures on the Government website.
But, you are then excluded from paying tax under the BIK, benefit in kind scheme. Additionally, there is a system in place to give tax relief to someone privately providing a car used for business. Under the Mileage Allowance Payment scheme, you can claim 45 pence per mile for the first 10,000 miles. If you are paid less per mile, you can claim the balance on your tax return.
One of the most popular cars that we supply on a car allowance is the VW Golf and often the 1.6 TDi S. Yesterday one of our clients called in to see us with his new Golf and say thanks to Andy in the sales team.
The Golf was funded on a personal car leasing agreement, in our opinion the best way of funding a private car that will be used for business mileage. You know how much you have to pay each month, the car is new and under manufacturer warranty and you can include maintenance which will even include tyres.