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Company Car Allowance

For many years, businesses have been using company cars as an employment incentive. In the UK, almost one million motorists drive a company vehicle. Whilst this is still a popular encouragement, an increasing number of employers are beginning to offer cash allowances to their employees to put towards the cost of a vehicle, this is also known as ‘Cash for Cars’.

Key Features

  • The employee leases the vehicle in their own name, rather than the companies 
  • The employer offers the employee a cash allowance each month, for them to source their own vehicle 
  • Removes the cost of issues such as administration of your vehicle fleet 
  • Offers an alternative to paying company car tax

Providing employees with company car allowances removes the need for company car tax as well as reducing cost and administration time associated with running company cars. The ‘Cash for Cars’ demand boomed in 2002, when changes were made to Benefit in Kind (BIK) tax. Many companies removed numerous prestige and status cars from their approved vehicle lists. More and more organisations now give a cash allowance for employees to fund their own vehicles. 

Your drivers can use their company car allowance to buy their own car, either by;

  • Outright Purchase 
  • Hire Purchase 
  • Personal Contract Purchase (PCP) 
  • Personal Contract Hire (PCH)

Is Company Care Allowance the right option for my company?

There is no right or wrong option, Company Car Allowances is a personal decision based on the businesses circumstances such as its financial situation, tax liabilities and administration capacity etc. This is why it is crucial to research all options before reaching a decision. 

For further guidance on what could be the best option for your business, call one of our knowledgeable advisors on 01527 571610 who will be happy to help.

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