private car used for company mileage

[sallie]

I am a sales rep doing about 35,000 miles a year. Three years ago I did my sums and decided that instead of having a company car it would be cheaper to buy my own and claim the mileage allowance as laid down by the government. This being (in each tax year) 40p per mile for the first 10,000 miles and 25p per mile therafter.
This was fine when diesel was 72p a litre but now it's around 99p a litre it seems as if it is costing me to go to work. The government don't seem to be increasing the allowance. Is there anything that I can do?
sallie

[wolvoman]

I am a sales rep doing about 35,000 miles a year. Three years ago I did my sums and decided that instead of having a company car it would be cheaper to buy my own and claim the mileage allowance as laid down by the government. This being (in each tax year) 40p per mile for the first 10,000 miles and 25p per mile therafter.
This was fine when diesel was 72p a litre but now it's around 99p a litre it seems as if it is costing me to go to work. The government don't seem to be increasing the allowance. Is there anything that I can do?
sallie

The mileage allowance isn't laid down by government, it is decided by individual companies.

The government does lay down how much mileage you can claim before you pay tax (or reclaim overpaid tax if the reverse is true).


So things you could do.

1. Ask to be paid a higher mileage allowance by your company.
2. Drive a more economical and cheaper to run car.
3. Vote against the government in the next election!

[blue_monkey]

I am self-employed, the tax office told me I could allow 40p per mile for personal car expenses (I do not have a car regsitered to the company) so in a way OP is right. It is down to the the company but the OP will have to declare this and will have to pay tax on it so will not gain much.

[AP]

The 40p per mile for the 1st 10k miles plus 25p per mile afterwards is the Inland Revenue Authorised Mileage rate.

If your company pays, say 45p per mile to you, you will then have to pay income tax and national insurance on the extra 5p per mile that you receive. But on the other hand, if your company pays just 35p per mile, you can then claim tax relief on the 5p per mile by completing form P87 from the Inland Revenue after the year end. Tax relief means that the shortfall will be deducted from your gross income before tax is calculated.

For me, I just refuse to use my own car for business purposes and use buses and trains instead - or get a lift from other colleagues. In this way, I simply get re-imbursed by the exact amount that I paid on public transport which means that I will not be out-of-pocket because of high fuel prices.

[withabix]

I get a car allowance of £4700 per year (before tax/NI) and all of my fuel via an AllStar Card (no tax liability for having the card as it's my car not my employer's). I do 25000 business/7000 private and break even running a car that cost me £18000, based on claiming tax relief and a loan for 100% of the purchase price via my mortgage at mortgage rate.

This is WAY better than having a company car - I'd only get a £17000 list-price car (my £18000 car has a list price of £24500!) and I'd be taxed to death on the company car (at list price) and the private fuel which went with it.

Also, at the end of my 3 (or 4) years paying for my car, I will have at least £5000 residual value towards the next one, meaning I can have a better one by £5k or similar at a lower monthly cost. You don't get that with a Company Car!!!

[AP]

I get a car allowance of £4700 per year (before tax/NI) and all of my fuel via an AllStar Card (no tax liability for having the card as it's my car not my employer's). I do 25000 business/7000 private and break even running a car that cost me £18000, based on claiming tax relief and a loan for 100% of the purchase price via my mortgage at mortgage rate.

This is WAY better than having a company car - I'd only get a £17000 list-price car (my £18000 car has a list price of £24500!) and I'd be taxed to death on the company car (at list price) and the private fuel which went with it.

Also, at the end of my 3 (or 4) years paying for my car, I will have at least £5000 residual value towards the next one, meaning I can have a better one by £5k or similar at a lower monthly cost. You don't get that with a Company Car!!!

If you want to get a bi-fuel car that can run on LPG, or a hybrid car like the Toyota Prius which you can get a 1 to 2 year old one for around £18k, you will be quids-in in your situation.

[withabix]

Looked at this but as I wanted a diesel Galaxy Ghia, it wasn't really an option!

LPG conversions only work financially for high mileage drivers, given the conversion cost in the first place. I looked at this when petrol was 80p/l and LPG was about 33p and I recall you needed to have a resulting difference between business and private miles of at least 25,000 miles per year before you recouped the conversion cost in 3 years.

[jjames]

How can a car cost more than 25p a mile to run, never mind 40p?

On the motorway any decent car should be getting at least 10 miles to the litre, which is 10p per mile. Any other costs incurred are much the same as they would be were the car only used for private use, and the wear and tear of motorway miles is nigh-on negligible.

I run a 4-year-old Hyundai as my works (and home) car, doing 15K a year. The car cost me £3000 two years ago, and I'll run it until it starts to become unreliable (when I'll get about a grand back for it in part-ex, or possibly nowt at all if it runs well for another 3-4 years or so, by which time it'll have paid for itself many times over). I get £3600/year to run it from the company, plus the £5250 from the travel expenses, far, far more than the car is costing me. I'm raking it in quite honestly (the car's still under manufacturer's warranty as well which is a bonus, heh).

Bottom line is, even if you were paying say 7p/mile a few years back, and 10p/mile now, that still means that Mr Brown's only obligation is a max of 3p/mile in expenses, equal to £300/year per 10,000 miles. I can absorb that -- less than a tenner a week? Not worth getting wound up about really -- just take a couple less beers on your liquid lunch ;)

[rdwarr]

How can a car cost more than 25p a mile to run, never mind 40p?

Buy a Bentley for £200,000. Sell it a year and 10,000 miles later for £50,000 less and it will start to make sense. ;)

[billywhizz]

The 25p per mile and 40p per mile allowance is not just for fuel, it's to accomodate the cost of insurance (Extra if you add business use), MOT, Running costs (Servicing maintenance etc), Road Fund Licence and depreciation.

As for the original OP, Sallie you dont say if you also get a car allowance on top to purchase your own vehicle but if you do then you should be ok at 40p and 25p. My lovely company offer me £3500 per year for the car and 12pence (yes 12 pence) per mile for my fuel. Oddly I still have a company car :confused:

At 35,000 miles though I think you should recheck your sums as you may well be better off back in a company car. It all depends on how much extra allowance you get and how you are buying the car.

If you want me to help you through the calculation feel free to PM me and we'll take it out of the public eye (I work for a large bank doing this type of stuff all day).

[jjames]

> The 25p per mile and 40p per mile allowance is not just for fuel, it's to accomodate the cost of insurance (Extra if you add business use), MOT, Running costs (Servicing maintenance etc), Road Fund Licence and depreciation.

My figures:

Extra insurance ... £30/year
MOT ... £40/year (passed both times)
Servicing/Maintenance ... £150/year, no maintenance required (40K on first set of tyres/brakes/exhaust etc) -- under manufacturer's warranty until it is 5 years old.
Road Tax ... £125/year (nothing really as this would be the case if it were a private car as well)
Depreciation ... £1000/year max on my car.

Still not costing me that much I have to say :)

If cars are costing people more than the 40/25p/mile, they're driving the wrong car. The 40p/mile is NOT to pay for the upkeep of the car; that is what the £4-5000 a year you get as a company car allowance is for.

[wolvoman]

My figures:

Extra insurance ... £30/year
MOT ... £40/year (passed both times)
Servicing/Maintenance ... £150/year, no maintenance required (40K on first set of tyres/brakes/exhaust etc) -- under manufacturer's warranty until it is 5 years old.
Road Tax ... £125/year (nothing really as this would be the case if it were a private car as well)
Depreciation ... £1000/year max on my car.

Still not costing me that much I have to say :)

If cars are costing people more than the 40/25p/mile, they're driving the wrong car. The 40p/mile is NOT to pay for the upkeep of the car; that is what the £4-5000 a year you get as a company car allowance is for.


Sorry, but I would say that your car is far below the average for running costs as far as cars go. Your figures are not even close to those paid by most people who use a car for business mileage.

Generally people who receive a car allowance do not get anywhere near the 40p/25p per mile, it is more like 5p to 15p or thereabouts. Those without car allowances may get more. Least I've ever got is 25p per mile, most is 55p per mile, but that definitely had to account for upkeep of the car.

I've posted this on another thread before, but the cost of running a car is significantly more than just fuel.

Insurance costs more for higher mileages.
Insurance costs more if you need to use the car for business mileage.
Service intervals are reached more frequently so servicing costs are higher.
Wear and tear is higher and so repair costs are higher.
Depreciation is higher. Cars depreciate quicker if used on the road than if stored in the garage - also more mileage equals more damage and hence higher depreciation.
And of course petrol costs more as you cover more mileage.

[jjames]

Even if you don't get the full 40p/25p per mile, surely you can claim the rest back from the taxman?

In fairness I only do around 13-15K in business miles per year, which is below the average. But in the 30,000 miles I've run this car (it had only 12,000 when I bought it for 3k) it's never needed any consumable parts (and has only been in for one repair in that time, for a noisy rear wheel bearing which was probably caused when the missus decided to kerb it at 40mph, tsk), and the £3000 paid for it means that depreciation can only ever be £3000/the number of years I use it for.

I understand that most people pay more than this for their car, mainly, presumably, because they don't want to be driving around in a cheap (albeit reliable and economical) Korean car all day. But even so I don't understand where these massive figures some people quote come from.