Petrol allowance

yogrob

Please could someone advise me on petrol allowance.
As far as I have been made aware by my employer, pay me 25p per
mile for travel expenses, I am aware that the government suggests 40p is the correct amount. With a P87 claim form, am I able to claim back the full amount of 15p per mile?
By the time April 2011 comes to an end I would have travelled approx 8000 miles for work calls.
A colleague has me worried as they stated they only got a small amount back when they claimed the last three years.
I look forward to your advice....

System

You only get the tax back on the difference I.E. 3p per mile

yogrob

I am confused... why does the government suggest 40p is what you should receive but in fact what your saying is that I only get 28p per mile??

System

The government allows your employer to pay 40p per mile (for the first 10,000) without HMRC taxing it. Since your employer doesn't pay that, HMRC allows you to reclaim the tax on the difference., so you still effectively end up with 40p per mile tax free (even though your employer is only paying 25p)

I know it doesn't sound right but I'm having problems putting into words how I understand it.

MrsManda

yogrob wrote: »

I am confused... why does the government suggest 40p is what you should receive but in fact what your saying is that I only get 28p per mile??

Your employer can pay you up to 40p per mile without you paying tax on the allowance. This does not mean they have to, or should pay you this much.

However if your employer doesn't pay the maximum you can claim tax relief on the difference.
For example:
You drive 100 miles in a year
Your employer pays you £25 (100*25p)
The allowable amount is £40
Therefore you can claim tax relief on £15
You pay 20% tax therefore your tax relief is £3

http://www.hmrc.gov.uk/incometax/relief-travel.htm
http://www.hmrc.gov.uk/incometax/relief-mileage.htm
http://www.hmrc.gov.uk/rates/travel.htm

I expect your employer pays 25p per mile because it's simplier to pay a flat rate regardless of the number of miles travelled a year than pay two rates depending on how many miles are travelled. Plus it's cheaper.

AnxiousMum

You should renegotiate this amount with your boss if possible. I get 40p per mile, but have yet to do over the 10,000 in a year before it dips down to a lesser amount.

yogrob

Just found this from a link given above:

You can work out the amount of tax relief – called ‘Mileage Allowance Relief’ - to which you are entitled like this:
1. add up your business miles travelled in the tax year
2. multiply your business miles by the approved mileage rate to work out the approved amount – follow the link below for the latest approved mileage rates
3. add up any mileage allowance payments received from your employer
4. compare any mileage allowance payments received with the approved amount
If the approved amount's more, you're entitled to Mileage Allowance Relief on the difference.
For example, you use your own car for 850 business miles and your employer pays you 30p per mile. The approved amount is £340 (850 times 40p). The allowance you get from your employer is £255 (850 times 30p). Your Mileage Allowance Relief is £85 (£340 less £255).
You are only entitled to Mileage Allowance Relief if your employer pays you:

• no mileage allowance
• less than the approved amount
  If your employer pays you more than the approved amount, you'll have to pay tax on the extra

dynades

my employer pays me 35 pence per mile included in my pay per month but i pay tax on it,as i have already payed tax at the pump is this correct.they also only pay me 35 pence upto 6000 miles then at a lower rate,is that also correct.

HappyMJ

dynades wrote: »

my employer pays me 35 pence per mile included in my pay per month but i pay tax on it,as i have already payed tax at the pump is this correct.they also only pay me 35 pence upto 6000 miles then at a lower rate,is that also correct.

If they want to only pay 35p then you need to claim the difference as above. You shouldn't be paying any tax on the payment. Speak to HR or claim the full 40p from HMRC. Note you'll only get 20% of what you claim back as a refund.

jennifernil

!!!!!! wrote: »

The government allows your employer to pay 40p per mile (for the first 10,000) without HMRC taxing it. Since your employer doesn't pay that, HMRC allows you to reclaim the tax on the difference., so you still effectively end up with 40p per mile tax free (even though your employer is only paying 25p)

This is the important bit to understand.

HMRC allow you to receive 40ppm tax free, but they cannot force your employer to pay you 40ppm.

And you cannot expect the rest of the taxpayers to subsidise your employer by giving you the difference between the 40ppm and whatever your employer pays.

If your employer does not pay 40ppm, you need to take that up with them.

If providing a car yourself to use for your work is not part of your contract of employment, you could refuse to use your own car.

Some employers pay a "car allowance" and require the employee to use it to provide a car, this is taxed as additional salary. Sometimes they then pay less than the 40ppm as they expect the car allowance to make up the difference.

Hammyman

yogrob wrote: »

I am confused... why does the government suggest 40p is what you should receive but in fact what your saying is that I only get 28p per mile??

Its a tax deductible expense. That means that if it amounts to £100 @ 40p per mile, you have £100 deducted off your gross annual income for calculating the amount and are refunded that amount through tax so you'd get 20% or 40% of that depending on what tax bracket you're on. You don't get £100 in cash.

As regarding jennifernils' comment about the tax payer subsidising it, there is no subsidy. There is only a refund on tax you've already paid. You aren't paid out in addition to your gross income.