Car allowance tax
Discussion
Asking for a friend. It's not me as I'm retired!
He's losing his car allowance as he's working from home for the foreseeable future. Trying to work out what that means to his net income, he's realised his tax code is 770L rather than 1250L.
He's been on to HMRC via the web, and they say the 770L is down to his car allowance.
I thought (as he did) that car allowances are taxed as if it was pay, rather than by adjusting your tax code. Is that right? He's concerned he has been paying tax twice.
He's losing his car allowance as he's working from home for the foreseeable future. Trying to work out what that means to his net income, he's realised his tax code is 770L rather than 1250L.
He's been on to HMRC via the web, and they say the 770L is down to his car allowance.
I thought (as he did) that car allowances are taxed as if it was pay, rather than by adjusting your tax code. Is that right? He's concerned he has been paying tax twice.
98elise said:
Asking for a friend. It's not me as I'm retired!
He's losing his car allowance as he's working from home for the foreseeable future. Trying to work out what that means to his net income, he's realised his tax code is 770L rather than 1250L.
He's been on to HMRC via the web, and they say the 770L is down to his car allowance.
I thought (as he did) that car allowances are taxed as if it was pay, rather than by adjusting your tax code. Is that right? He's concerned he has been paying tax twice.
Does he get fuel paid for? He's losing his car allowance as he's working from home for the foreseeable future. Trying to work out what that means to his net income, he's realised his tax code is 770L rather than 1250L.
He's been on to HMRC via the web, and they say the 770L is down to his car allowance.
I thought (as he did) that car allowances are taxed as if it was pay, rather than by adjusting your tax code. Is that right? He's concerned he has been paying tax twice.
A car allowance is just paid as extra salary and directly, has no effect on tax code.
Other benefits (private fuel, healthcare etc) are not paid to the employee, they're taxed by reduction in free pay (tax code).
Your friend will have been given all the necessary paperwork by his employers sometime between April and July this year, and HMRC will have given him a detailed breakdown of how his tax code was calculated. It's his responsibility to make sure that's correct; not HMRC's.
Doofus said:
98elise said:
Asking for a friend. It's not me as I'm retired!
He's losing his car allowance as he's working from home for the foreseeable future. Trying to work out what that means to his net income, he's realised his tax code is 770L rather than 1250L.
He's been on to HMRC via the web, and they say the 770L is down to his car allowance.
I thought (as he did) that car allowances are taxed as if it was pay, rather than by adjusting your tax code. Is that right? He's concerned he has been paying tax twice.
Does he get fuel paid for? He's losing his car allowance as he's working from home for the foreseeable future. Trying to work out what that means to his net income, he's realised his tax code is 770L rather than 1250L.
He's been on to HMRC via the web, and they say the 770L is down to his car allowance.
I thought (as he did) that car allowances are taxed as if it was pay, rather than by adjusting your tax code. Is that right? He's concerned he has been paying tax twice.
A car allowance is just paid as extra salary and directly, has no effect on tax code.
Other benefits (private fuel, healthcare etc) are not paid to the employee, they're taxed by reduction in free pay (tax code).
Your friend will have been given all the necessary paperwork by his employers sometime between April and July this year, and HMRC will have given him a detailed breakdown of how his tax code was calculated. It's his responsibility to make sure that's correct; not HMRC's.
In addition his net pay after his allowance goes is going to be very similar to what it is now which is very strange!
I've told him to talk to his payroll people tomorrow.
98elise said:
I don't know but I'll check. The thing is the code difference is pretty big to be fuel. HMRC have said it's his car allowance.
In addition his net pay after his allowance goes is going to be very similar to what it is now which is very strange!
I've told him to talk to his payroll people tomorrow.
Easily confirmed. How much is his car allowance pa?In addition his net pay after his allowance goes is going to be very similar to what it is now which is very strange!
I've told him to talk to his payroll people tomorrow.
Doofus said:
98elise said:
I don't know but I'll check. The thing is the code difference is pretty big to be fuel. HMRC have said it's his car allowance.
In addition his net pay after his allowance goes is going to be very similar to what it is now which is very strange!
I've told him to talk to his payroll people tomorrow.
Easily confirmed. How much is his car allowance pa?In addition his net pay after his allowance goes is going to be very similar to what it is now which is very strange!
I've told him to talk to his payroll people tomorrow.
He'll be on to payroll this morning so hopefully resolved soon.
98elise said:
Muzzer79 said:
Did he have a company-supplied car in the past and HMRC haven’t been updated to advise it’s been changed to an allowance?
No he's never had a car, it's always been an allowance as part of his package. 
Car allowances paid as cash are effectively just extra salary, and are taxed as such - shouldn’t impact the tax allowance unless over 100k or there’s some other benefit interacting with the code.98elise said:
No he's never had a car, it's always been an allowance as part of his package.
I've never had a company car and also get a car allowance. Yet last year I had a tax issue and it was only when thoroughly digging through the tax/SA portal, I found HMRC thought I did have a company car. No idea how it happened but I removed it sharpish!DanL said:
98elise said:
Muzzer79 said:
Did he have a company-supplied car in the past and HMRC haven’t been updated to advise it’s been changed to an allowance?
No he's never had a car, it's always been an allowance as part of his package. Car allowances paid as cash are effectively just extra salary, and are taxed as such - shouldn’t impact the tax allowance unless over 100k or there’s some other benefit interacting with the code.ro250 said:
Surely he'd know why he's having deductions made from his salary by HMRC?
He assumed that as he worked for a large company, they knew what they were doing. He's been PAYE all his life so never really had to take an interest in the workings of tax.It's only now he's trying to work out how much worse off he will be that he noticed the tax code looked odd. HMRC have told him it's due to his car allowance, which is really confusing him!
98elise said:
ro250 said:
Surely he'd know why he's having deductions made from his salary by HMRC?
He assumed that as he worked for a large company, they knew what they were doing. He's been PAYE all his life so never really had to take an interest in the workings of tax.It's only now he's trying to work out how much worse off he will be that he noticed the tax code looked odd. HMRC have told him it's due to his car allowance, which is really confusing him!
being in receipt of a company car allowance, i’m guessing he also gets mileage paid for by the company?
usually companies do no pay the full 45p per mile (up to 10k miles) and 25p per mile (over 10k). has he ever claimed the difference in tax on this amount? you usually get a refund and then hmrc say- we’re changing your tax code. i always make sure they don’t do this as my mileage could vary every year. but i know people who a few years down the line ended up with a mess of tax codes after being over/ under taxed......
usually companies do no pay the full 45p per mile (up to 10k miles) and 25p per mile (over 10k). has he ever claimed the difference in tax on this amount? you usually get a refund and then hmrc say- we’re changing your tax code. i always make sure they don’t do this as my mileage could vary every year. but i know people who a few years down the line ended up with a mess of tax codes after being over/ under taxed......
Just to bring closure.
It was a cock up by HMRC. It used to be accounted for via P11D, but changed to PAYE. Some time later the codes changed back again so was being deducted twice. It's affected the past two years so he's due a refund. HMRC have changed his code immediately.
He's not the only person affected.
It was a cock up by HMRC. It used to be accounted for via P11D, but changed to PAYE. Some time later the codes changed back again so was being deducted twice. It's affected the past two years so he's due a refund. HMRC have changed his code immediately.
He's not the only person affected.
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