It’s the Office you know, plus the tools to help you work better together, so you can get more done—anytime, anywhere. A company car typically incurs much heavier tax payments than a car allowance. As a result, the vehicle doesn’t belong to the company and the responsibility of maintenance falls to the employee. Log miles and calculate the value of your drives with free mileage tracking templates. On the downside, businesses may not be getting the most effective ROI from a car allowance policy. If you need further advice about car allowance in the UK, speak to one of our expert advisers on 01455 858 132. However, if you provide a company car you may need further assistance. Most companies offer a mileage reimbursement at a cents-per-mile rate. One of the main differences of giving your employees an allowance, instead of a company car, is that you take car allowance tax out of the employee’s main earnings at the normal income tax rate. Company car vs car allowance Overall, choosing a cash allowance is the more flexible option, since this cash can be used for a variety of purposes, or to finance your dream vehicle. A company car is a perk that helps recruit and retain great staff. We use necessary cookies to make our website operate. In this guide, we explain the process and what you need to keep in mind for your company car policy to work effectively. A mileage reimbursement often requires employees to maintain a mileage log. A car allowance covers … Firstly, you need to decide how much you’re willing to provide to the employee in order for them to purchase a vehicle. Companies do this to attract and keep employees. The structure of an ECOS provides an element of security in terms of occupational road risk, as the employer can ensure that the vehicle is fit for purpose. A mileage reimbursement varies based on how much you drove. A car allowance is what an employer gives employees for the business use of their personal vehicle. This usually works as a reimbursement, not as a typical ‘allowance.’ It covers the cost of fuel as well as wear and tear. Get a free callback from one of our regional experts today. She tracks her business miles every month and includes it with her monthly expense report. As a business, you should include your allowance entitlement in your contract, as well as the staff member’s responsibilities to their vehicle. Senior managers, middle/junior managers and sales representatives receive £8,200, £6,500 and £5,200 a year on average respectively. With a non-accountable plan, reimbursements are reported as taxable pay. Currently, private mileage for cars and vans is 45 per mile, up to 10,000 miles, and 25p per mile, over 10,000 miles. It also raises a number of questions from the employee. In this instance, you can use the government’s calculator, which you can find here. Call us today on 0800 231 5199 or fill in your details below to speak to an expert. Professionals receive the lowest average allowance of £4,600 -- … That’s the major difference between it and a car allowance. This is a common question from employees—and the answer is, “Yes!” You should outline your mileage policies prior to agreeing to give the employee either company car fuel allowance, or just an allowance to purchase a vehicle. Reiterate that the employee is responsible for maintenance, insurance, etc. With your permission, we’d also like to set optional Google analytics cookies to help us improve our service, however, we won’t set optional cookies unless you enable them. We’ll go into this in further detail later in the article. Due to the complex nature of car allowance, and the amount of responsibilities the employee has to take on, a number of questions are likely to arise. It also may have fewer tax implications than a company car. The downsides of a mileage reimbursement are that it’s historically tough to get accurate mileage logs and expense reports. Example: Michelle works for Superior Construction Company as a site foreman. It’s a sum of money you add to the employee’s annual salary for the purpose of allowing them to buy or lease a vehicle. It’s a sum of money to allow an employee to purchase a vehicle, which they must then maintain. However, rates can differ, so it’s worth referring to the HMRC’s advisory fuel rates. This is because you pay the allowance as part of your employee’s salary. You may disable these by changing your browser setting, but this may affect our websites functionality and your user experience.