How generous are your car allowances?

In reply to Keith:

Hi Keith, they are about average to be honest. Around £5-6k dependent on grade.

Personal car use is set at 45p a mile by HMRC up to 10,000 miles. 25p thereafter. www.gov.uk/.../travel-mileage-and-fuel-rates-and-allowances. You don't have to use the HMRC allowances but most companies would.

The fact you offer a car allowance doesn't really change matters if the lease is in the employee's name (or the employee uses their allowance to purchase their own car). It is a personal car they are using, not a company one.

In reply to Lesley:

I disagree with Lesley on this, a little, as it (for me) depends upon what you are trying to achieve by providing a car and /or a car allowance.

If the car allowance is designed to be cost neutral (after tax etc) with a company car then there is really little reason for the payment per mile to be different.

So I would look at the total cost of ownership and what you are trying to achieve. I have seen the same petrol allowance paid, and entirely different ones paid depending on the approach to company cars, to car allowances and to what situation you are trying to leave the employee in.

In reply to Keith:

thanks both. We offer the same rate for car allowance or company car users. When I've been in receipt of car allowance myself and used my own car I've normally got around 12p per mile. One of our competitors is paying around 14p, there seems to be no hard and fast rules on this. Although the employee is quite senior, he is driving a lot for work and although car allowance is often used as a way of bumping up remuneration packages, in this case don't want him to be out of pocket on his mileage. I've asked him to keep a log of his mileage expenses and what he is likely to be able to claim as a tax refund and we will refund anything that leaves him out of pocket. Do you think this is a reasonable approach?

In reply to Daniel:

There are HMRC rules and if you pay more then there is a tax implication.
14p might be for a different vehicle. it may not be really true or they may just be paying the tax or not getting caught