What is a car allowance?
The cash allowance is added to an employees annual salary (usually added per month) and is used to pay for a vehicle for business purposes. The car allowance could be used to finance a car in a number of different ways. For example, the employee can: Make payments towards a vehicle they already currently own/lease.
Should I choose a company car or a cash allowance?
Take care however, as if you are offered the choice between a company car and a cash allowance, you will be taxed on the GREATER of the two benefits, unless the car you choose emits less than 75g/Km of CO2. For more information see our easy to read employee guide to company car tax/benefit in kind to find out more.
Can You claim a mileage allowance on top of a car allowance?
As a car allowance is given to the employee to buy their own personal vehicle, they can claim a mileage allowance on top when using this car for work purposes. A car allowance can help to cover fuel costs in general but claiming a mileage allowance on top is good for business. What does car allowance cover?