Self employed mileage expenses - again, sorry!

elljay

Morning all, I have been reading the recent discussion re car allowances but still feel confused, sorry.

Last year I claimed mileage on my self assessment form for journeys from home to my client's premises and between his several premises and that was fine. This year, as I am now working far fewer hours for them they have offered to pay me mileage for the journeys between premises - luckily my trip from home to the main base has gone down from 20 to 4 miles each way due to an office move.

Presumably if they pay me mileage, and I don't yet know how much but it will be very basic, I wouldn't claim it as an expense on my tax form as that would be a double claim but can someone explain to me whether I would be better off claiming via tax or direct from the employer? Or is there no difference? And do I need to check anything else? I've got business use on my insurance from my days as a civil servant when I could claim mileage - is this the right insurance to have?

I really apologise if this has been explained in the other threads, but this is only my second year of proper self employment and am still getting to grips with things - I don't yet know enough to ask the right questions.

Many thanks

Liz

fengirl_2

You need to include the mielage allowance paid to you by your customer in your takings as this is part of the earnings or takings of your business. You then continue to include your own calculation of business miles in your deductions in your accounts in the normal way.
If you left them out - you wouldnt get any relief at all!

elljay

Thanks, but wouldn't that mean I'd be being paid twice for the same journeys? Once from the customer and once through the tax system?

fengirl_2

When your customer pays you for mileage, you must include it in your takings, so it is taxed. By including a deduction for business miles in your expenses, you are obtaining tax relief. You are not getting relief twice.

Example: Customer pays £1000 mileage - this is taxed at 20% = £200
You include in your deductions £1000 cost of travel, reduces tax by £1000 @ 20% = £200.

elljay

So I would still end up with the £1000 in the end. If, as last year, I didn't get anything from them, just claimed via the tax form, would I then have ended up with £800, using these figures?

What I'd really like to do is minimise what they pay me as they are a charity, and if the difference is proportionally as in this example (in practice far less) then I won't claim from them - I feel pretty guilty about taking the money and we're talking about rock bottom rates here anyway.

Thanks so much, Liz

fengirl_2

If they didnt pay you mileage, then you wouldnt pay tax on the mileage as part of your takings. You would have included your mileage costs in your accounts, meaning you would pay £200 less tax - but you would have still had to pay out £1000 in travel costs from your own takings. You are therefore better off having your customer contribute to your costs - but this is really up to you. I expect most businesses factor in travel costs with the costs of their goods and services, eg 'free' delivery on a suite has probably been added to the cost of the suite somewhere.

elljay

fengirl wrote: »

If they didnt pay you mileage, then you wouldnt pay tax on the mileage as part of your takings. You would have included your mileage costs in your accounts, meaning you would pay £200 less tax - but you would have still had to pay out £1000 in travel costs from your own takings.

Exactly so, and this is what I did last year but then they were paying me for twice the hours of work that they are now so I didn't ask for mileage costs, just claimed tax relief and paid the rest myself. As I'm now working far fewer hours for them I thought I might claim from them but didn't understand how it worked. I'll look at the figures towards the end of the year and decide then, if I'm seriously out of pocket I'll claim from them, if it's marginal or I can combine trips with shopping or something I won't claim.

Thank you so much for your help - massively clearer now.

Liz

elljay

As a ps to this discussion, have just discovered it's going to be 20p per mile. No wonder I'll never be rich at this rate!!

Thanks again, Liz