In the United Kingdom, company car allowance is a benefit that employers may offer to their employees. It is a form of financial support given to the employee for the use of their personal vehicle for business purposes. It is also known as a car allowance or a company car cash allowance. This article will discuss the average UK company car allowance and its benefits and drawbacks.

What is a company car allowance?

A company car allowance is an amount of money given to employees to cover the cost of using their personal vehicle for business purposes. It is a payment made by the employer to the employee in addition to their salary, and it is usually given on a monthly or annual basis. The allowance is intended to cover the cost of fuel, maintenance, insurance, and other related expenses associated with using a personal vehicle for business purposes.

The amount of the car allowance varies depending on the employer and the job role. Some employers offer a fixed amount, while others may offer a percentage of the employee’s salary. The amount of the allowance may also be based on the employee’s job responsibilities and the amount of driving they do for work.

Benefits of a company car allowance:

  1. Flexibility: A company car allowance gives employees the flexibility to choose their own vehicle, which allows them to select a car that suits their lifestyle and personal preferences.
  2. Financial benefit: A company car allowance provides employees with a financial benefit that can help offset the cost of owning and maintaining a car.
  3. Increased motivation: A company car allowance can be a motivating factor for employees, as it is a tangible benefit that they can see and appreciate.
  4. Improved job performance: A company car allowance can improve job performance by allowing employees to travel more efficiently and effectively to meetings, conferences, and other work-related events.

Drawbacks of a company car allowance:

  1. Additional costs: While a company car allowance can offset some of the costs associated with owning a car, employees may still have to pay additional costs such as fuel, maintenance, and insurance.
  2. Tax implications: A company car allowance is considered taxable income, and employees may be required to pay additional taxes on the allowance.
  3. Maintenance issues: Employees who choose to use their personal vehicle for business purposes may have to deal with maintenance issues and repairs more frequently, which can be a source of stress and inconvenience.
  4. Environmental concerns: Personal vehicles are often less fuel-efficient than company cars, which can contribute to increased carbon emissions and other environmental concerns.

The average UK company car allowance:

The average UK company car allowance varies depending on the employer and the job role. However, according to a survey conducted by Fleet News in 2020, the average monthly car allowance for a company director is £707. The survey also found that the average monthly car allowance for a senior manager is £546, while the average monthly car allowance for a middle manager is £402.

The survey also found that the average annual mileage for employees using a company car allowance was 12,000 miles per year. This indicates that many employees are using their personal vehicles for business purposes, which may increase the wear and tear on their cars and require more frequent maintenance.

Conclusion:

A company car allowance can be a valuable benefit for employees, providing them with financial support and flexibility. However, it is important for employers to consider the potential drawbacks of a car allowance, including additional costs, tax implications, and environmental concerns. Employers should also consider the average UK company car allowance for their industry and job roles when determining the appropriate level of support to offer their employees. Ultimately, a well-designed car allowance program can be a win-win for both employers and employees.