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Car allowance vs Company Car?

Posted 25 April 2013 under Tax Questions

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Could someone please help me to understand what would be the best option. I am currently sitting in a situation where I can choose between a car allowance (travel allowance ) and a company car. I don't understand the tax implications regarding this.. I would obviously want to take the least expensive route..

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TaxTimTaxTim says:
25 April 2013 at 23:35

It would depend on the car that is being offered and the value of it vs how much travel allowance you are being offered.

Company Cars are taxed at a certain rate and subject to a specific formula. However this can become very costly to you from a tax point of view as if the company itself buys the car via a lease agreement and then lets you use it there are severe tax implications. However then the wear and tear that you would suffer on your personal car doesn't apply. A travel allowance is taxable in your hands at 80% of the value, but you can deduct the business mileage that you travel as well as other costs. However you then have the issue of wear and tear of your car. It would depend on the value of what they are offering and how much business travel you actually do.


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