Income taken into account for Means tested benefits

Soletrader_2

Hi all,

I hope someone can shed a little light on my particular predicament.

I am currently a sole trader and claim for housing benefit, council tax benefit and tax credits.

At the moment my net profits are used to calculate the benefit and tax credits myself and my family are entitled too.

I am looking to grow my business over the next few years and changing my trading status from sole trader to a limited company sometime in April 2011 which will give my business a better platform to do so, not only from an image perspective but also from a tax perspective too.

If I change to a limited company, I am aware that the salary I take and any dividends paid out will be counted as my source of income and possible the company as a whole will be classed as an investment as I will be the only shareholder.

I currently claim mileage for business miles travelled in my car instead of putting the cost of the car into my business as it is more tax efficient for me to do so.

If I did this with a limited company, the company would pay me mileage, whilst I have to foot the running costs of the car out of the salary the company would pay me.

Does the mileage I get paid by the company count as income for housing benefit, council tax benefit and also tax credits?

Also how will owning a company affect my benefit claims? Its a service company with little value by way of assets apart from whatever is in the bank account and perhaps some small office furniture and computer equipment.

I hope that makes sense, but please feel free to ask more questions if you need more information.

Thank you in advance for your replies.

AnxiousMum

If a company pays you mileage at the approved rate of 40p per mile for I think the first 10,000 miles per annum, and then 22p per mile thereafter - (might need to check the level and second rate of payment) then that is not considered 'income'. If it pays you a car allowance, or provides a company car et.c, then I believe it would be a taxable benefit.

Soletrader_2

Thanks Anxious for the reply.

As stated its 40p for the 1st 10,000 and the correct rate is 25p thereafter and i'm aware that this isn't taxable income in the eyes of the Inland Revenue under income rules.

Car allowance is usually taxable via PAYE along with the salary and yes if a car is provided by the company for Private Use then yes its taxable under P11d

Im fully clued up on all this side of things as its sort of what I do for a living, hence whilst I'm looking to go from Sole Trader to Limited Company as mentioned in my first post

What I need to know is in the eyes of the Benefits People at the Council and from Tax Credits, is this mileage allowance classed as income when they work out how much benefit I would get?

Soletrader_2

bump, anyone have any suggestions?

Soletrader_2

bump

anyone??

enabledebra

reimbursement of expenses necessary to do the job are excluded as earnings although mileage isn't specifically mentioned. Reimbursement of costs re travel between home and work are specified as to be included as earnings.

Soletrader_2

enabledebra wrote: »

reimbursement of expenses necessary to do the job are excluded as earnings although mileage isn't specifically mentioned. Reimbursement of costs re travel between home and work are specified as to be included as earnings.

Thanks for the reply.

claiming mileage for work related travel only at the full rate, 40p and 25p are to reimburse the costs of the fuel element and the running costs of the vehicle itself .ie. wear and tear.

If what you say is correct I should be ok as it will be business use only.

The problem I have is that from an income tax point of view I know what counts and what doesn't and what is allowable and what isn't, but from a benefits point of view I don't have a clue as different forms of income and earnings etc. can be treated totally differently between tax and benefit purposes.

Thanks for your info.