Car allowance stress!

speedbird1973

SarEl wrote: »

The car allowance is not classed as "compensation" for not taking (or being given) a company car. It is a "payment for depreciation /costs" of your own car being used for company business. And hence it in part duplicates some of what the "40p" is for. I believed (but I am not sure about this) that the "40p" was for cases where no additional allowance was made, and if one was this was part of the offset. Or at least this is what I am led to believe by our accountant because we pay staff an allowance and a mileage rate, and this is what the staff have been told - that in fact because the allowance and the mileage rate amount to the same as the "40p" they cannot claim any more tax relief. Maybe the wording of the type of allowance matters?

Again SarEl.. the allowance is to finance a car... NOT maintain it and run it.. that's what the per mile allowance is for. TOTALLY SEPERATE

peachyprice

SarEl wrote: »

The car allowance is not classed as "compensation" for not taking (or being given) a company car. It is a "payment for depreciation /costs" of your own car being used for company business. And hence it in part duplicates some of what the "40p" is for. I believed (but I am not sure about this) that the "40p" was for cases where no additional allowance was made, and if one was this was part of the offset. Or at least this is what I am led to believe by our accountant because we pay staff an allowance and a mileage rate, and this is what the staff have been told - that in fact because the allowance and the mileage rate amount to the same as the "40p" they cannot claim any more tax relief. Maybe the wording of the type of allowance matters?

It depends on OP's particular circumstances, but a car allowance is usually in lieu of a car, not compensation for running costs.

wrightyi28

So is the 16p my employer gives me taxable? If not then I would be entitled to £3960 in total from HMRC and employer combined on 20k miles per year?

From employer:
20000 x 16p = £3200

From Taxman:

10000 x 24p = £2400
10000 x 9p = £900
Total = £3300
Taxed x 20% = £760

Total = £3200 + £760 = £3960

Does that sound right? I hope so as a measly £1400 per year wouldnt even cover the fuel!!

Any

SarEl wrote: »

I am no expert on tax (that's what an accountant is for) - but isn't there something wrong in this advice so far? The HMRC 40p tax relief amount is based on "all costs" - so petrol/depreciation/repairs and servicing etc. But the OP is getting £4,800 car allowance and 16p per mile buisness mileage from the employer - notjust 16p per mile. It is my understanding that the car allowance is counted as part of the "40p" in some way. As I said, I don't do these things - but I am sure that it isn't as simple as it sounds.

Well, I am an accountant and I have looked into this and I have been advised by ex tax HMRC officer that because car allowance is already tax, just like normal wages, even though it has "car" in the name it is actually viewed as compensation for requirement to have a car.

Then as you are responsible to have a car and use it on a whim of an employer you get 40p just like if you drove your own car without company car payment.

The difference is that employer cannot "make you" to have your own car or use your own car, unless they pay you car allowance and it is specified in contract.

Any

wrightyi28 wrote: »

So is the 16p my employer gives me taxable? NO If not then I would be entitled to £3960 in total from HMRC and employer combined on 20k miles per year?

From employer:
20000 x 16p = £3200

From Taxman:

10000 x 24p = £2400
10000 x 9p = £900
Total = £3300
Taxed x 20% = £760

Total = £3200 + £760 = £3960

Does that sound right? I hope so as a measly £1400 per year wouldnt even cover the fuel!!

Wouldn't even cover the fuel? If you spent £77 a week on fuel I doubt you would do only 20000 miles then. Or you had very thirsty car.

And forgot about that car allowance amount you are going to get? Where did you get £1400 only from??

And that is the difference between having company car and car allowance - you can get whatever you want with car allowance - and therefore control the consumption per mile.

SarEl

Any wrote: »

Well, I am an accountant and I have looked into this and I have been advised by ex tax HMRC officer that because car allowance is already tax, just like normal wages, even though it has "car" in the name it is actually viewed as compensation for requirement to have a car.

Then as you are responsible to have a car and use it on a whim of an employer you get 40p just like if you drove your own car without company car payment.

The difference is that employer cannot "make you" to have your own car or use your own car, unless they pay you car allowance and it is specified in contract.

Not going to argue - I said I didn't know and was repeating what I had been told.

Any

Let's start again...

You get
Employer: £4800 (less tax&NI) so roughly £3312 net pa
+ based on 20k miles pa

Employer
20000x16p = £3200 (not taxed, this is an expense)

HMRC
10000x24p= £2400
10000x9p = £ 900
Total £3300 TAX RELIEF, meaning they will change your tax code and you will not pay tax on next £3300 you will earn - having value of £660.

So totally in year you will get NET:
£3312 in wages from employer
£3200 in expenses from employer
£660 in tax relief from HMRC.

wrightyi28

Any wrote: »

Wouldn't even cover the fuel? If you spent £77 a week on fuel I doubt you would do only 20000 miles then. Or you had very thirsty car.

And forgot about that car allowance amount you are going to get? Where did you get £1400 only from??

And that is the difference between having company car and car allowance - you can get whatever you want with car allowance - and therefore control the consumption per mile.

It is a golf diesel should do 50+mpg.

So far I have gathered:

My 26k + 4800 car allowance is in effect £30800 per annum taxed, NI as usual.

As far as mileage goes. I will get the full 16p (not taxed) from my employer (for any mileage I do).

From HMRC I will get the 24p difference per mile for upto 10k and 9p per mile hereafter taxed?

Am I correct with what I am saying?

Thank you! :j

Any

SarEl wrote: »

Not going to argue - I said I didn't know and was repeating what I had been told.

I know why it is confusing - I used to think that as you get money towards the car you surely cannot get 40p - but then was advised by ex tax office employee that as they get taxed on the car allowance they would be worse off.

justanopinion

http://www.hmrc.gov.uk/rates/travel.htm is the official site that advises if that helps.