Car Allowance Benefit In Kind

A company car in simple terms is a car provided by a firm for the business and private use of one of its employees.

Car allowance benefit in kind. Drivers can use the money to buy their own car either by using conventional funding methods outright purchase or hire purchase or by choosing a personal contract purchase. This is a tax on the cash equivalent of your annual fuel allowance since this benefit in kind is taxed like a salary. Company car tax examples. Pure electric cars will not be subject to any benefit in kind tax at all for 2020 21 regardless of when the car was registered.

Or you can use hmrc s company car and car fuel benefit calculator if it works in your browser. The following examples show how the p11d value of the car its co 2 emissions and the employee s income tax rate are used to calculate the amount of benefit in kind bik tax due. The company car allowance is a cash benefit type scheme offered to new employees or an employee who is updating their current working contract. The shift to cash was partially driven by the 2002 changes in bik benefit in kind tax which removed many desirable status cars from companies approved lists.

A car allowance explained. Essentially it was this. They include things like company cars private medical insurance paid for by the employer and cheap or free loans. The same goes for cash allowance drivers they will have to pay a benefit in kind cash allowance tax on either the taxable benefit of the car or the cash allowance depending on which is greater.

A company car explained. Employees pay benefit in kind bik on the company vehicle based on the value of the vehicle co2 emission level and tax rate. Salary sacrifice cars would be taxed on the benefit in kind or the cash sacrificed whichever was the greater. You know what the monthly costs will be and so can budget accordingly.

This tax depends on the co2 emissions of your chosen car the value of the car when new as well as your income tax band. Note that for drivers of salary sacrifice cars or those with a cash allowance alternative income tax may be payable on the cash value rather than company car benefit tax. They are sometimes called perks or fringe benefits. If your company car package includes fuel you will also need to pay car fuel benefit each month.

A car allowance also known as cash for cars is a sum of money that is paid to an employee in addition to their salary as a substitution to a company. Using the hmrc calculator. Benefits in kind are benefits which employees or directors receive from their employment but which are not included in their salary cheque or wages.