Private Car Mileage Allowance - Review Needed

gjd0496

:j Thank you to all those that have posted to this thread. I am very pleased the chancellor has increased the allowance to 45p and even more pleased my company has agreed to pay the 40p rate as from now. I consider this a result. Updated 24/3/11

I doubt I am alone in this but I feel it is about time that the Private Car allowance is reviewed by HMRC as it is now way overdue, especially considering the cost of fuel and the fact this was last reviewed back in 2002/2003.

Back in the year 2000 I was encouraged (some may say forced :mad:) out of my lovely company car by a rather large tax bill and tempted into running my own car, which I still do. This decision was based on the then reasonable HMRC mileage allowance for running a private car which was reviewed annually.

The way this works is that the company pays me 25p per mile for business mileage which has to cover everything - petrol, insurance, road tax, tyres, MOT costs, repairs etc etc.

I then have to claim the balance (for the first 10,000 miles), up to the maximum allowable which is 40p per mile, in my annual tax return.

This is all very well but it means I have to fund this each year until I can claim it back. (Just a thought but perhaps I should charge HMRC interest until they pay me back, as they would certainly charge me if I owed them money?)

It is now getting to the point, or may have even gone past the point, where it is costing me money every time I drive on behalf of the company.

So Martin :money:, how about a campaign to get this reviewed in the forthcoming budget?

CLAPTON

if your company doesn't reimburse you properly for business mileage then you should discuss this with your employer

and you can't reclaim the difference between 25p and 40p from HMRC ; only the tax on that amount

lisyloo

The way this works is that the company pays me 25p per mile for business mileage which has to cover everything - petrol, insurance, road tax, tyres, MOT costs, repairs etc etc.

I don't think that's enough.
Your argument is with the company not paying you enough.
If it's not part of your contract/agreement then you could try to negotiate although of course we are all aware that our jobs aren't safe these days.
However unless it's part of your contract you aren't obliged to provide your employer with use of your private car.
I don't have a car so my employer would either have to hire me one or use alternative methods (we tend to get taxied to Heathrow if flying).
At about £35 per day for a hire car there's geberally not too much in it for them.

gjd0496

My apologies Clapton, you are correct its the tax I reclaim from HMRC but I think you are both missing my point, to my mind the allowance is too low. Yes I can take it up with the company, and have done so, but they rely on my ability to re-claim the tax to top-up the payments and therefore don't see a need to change the rate. Before someone asks, no I don't get a car allowance either.

lisyloo

but they rely on my ability to re-claim the tax to top-up the payments

If my calculations are right that's 28p if you're basic rate and 31p if your higher rate?
It's not a million miles from something reasonable but a lot depends on what car you have.

What type of car do you have and how much do you estimate it costs you to run?
Have you actually done the estimations?
Are you expecting your employer to subsidise you for a luxury car beyond the need for their purposes?
In which case might it be cheaper to hire a diesel vectra?

It's difficult to advise without knowing the pattern of your driving or the nature of your discussions so far.
Lots of my colleagues have families with one car and can't leave the wife & kids stranded or some (like me) don't have a car at all.

Sometimes it's not any more expensive for them to hire a car.
For example private car mileage @ 25 for 260 miles is £65.
If you hired a modest (vectra?) car and put diesel in it, it would be about the same.

I think we need more meat on the bones here.

What type of car do you have?
What's the mpg? diesel or petrol?
What do your reckon it costs per mile to run?
How many days is your typical trip and how many miles?

Just wondering if we can see if a hire car is cheaper if you have some sort of gaz guzzler.

petrol, insurance, road tax, tyres, MOT costs, repairs etc etc.

The road tax and cost of the MOT are nothing extra to you if you would be paying them anyway.
Although of course fuel, tyres, repairs etc. can be more.
Please tell me you do have class 1 insurance.

dzug1

In 2000 the allowance was not reasonable - it was bloated. You could quite easily make a profit on it then if careful

As to a review now, there are several factors that tend to suggest it might not help even if there was one - the need to maximise tax revenue, and the need to at least pay lip service to green issues

lisyloo

I think part of the problem is that some people have expensive cars and the employer might not be fully expensing this.
For example we have a Subaru Legacy 3.0L B spec which is a gaz guzzler and expensive to maintain.
That's not really the employers problem.
It not an issue for us a my OH gets a car allowance and we don't do a great deal of business travel.

But some people with expensive cars might like to consider hiring something more basic.
Hire round my way is £35 per day and then you only have to pay for fuel.
No insurance, tyres, servicing, repairs.
For some people this might work.

CLAPTON

gjd0496 wrote: »

My apologies Clapton, you are correct its the tax I reclaim from HMRC but I think you are both missing my point, to my mind the allowance is too low. Yes I can take it up with the company, and have done so, but they rely on my ability to re-claim the tax to top-up the payments and therefore don't see a need to change the rate. Before someone asks, no I don't get a car allowance either.

No I think you misss the substantive point

if e.g. it actually costs you 45ppm and your employer only pays 25 ppm then yes you can reclaim 20% of the difference (i.e. 4ppm) from the taxpayer but you are still out of pocket by 16 ppm

probably better for the HMRC to abolish the rule so there can be no claim and the employers can't use the HMRC rate as a smokescreen but that would cause difficulties for the self employed.

fred7777

lisyloo wrote: »

But some people with expensive cars might like to consider hiring something more basic.
Hire round my way is £35 per day and then you only have to pay for fuel.
No insurance, tyres, servicing, repairs.
For some people this might work.

OK, but if your only getting 25p a mile you would have to drive 140miles a day just to cover the cost of the hire.

Assuming for the sake of argument that fuel costs are 10p a mile then the OP is actually only getting 15p a mile so he would have to drive 233 miles each day to cover the costs.

It's also impractical for me to hire a car instead of using my own as hire places aren't open early enough in the morning or late enough in the evening so for every day I need a car I would have to hire for 2 days.

lisyloo

probably better for the HMRC to abolish the rule

But that doesn't really get round the fundamental problem that the employer is underpaying.
The employee (most of the time) is under no obligation to use their private car, so given the employee is subsiding the employer then this is the basis for a discussion.
I realise that tricky in the current economic climate but a reasonable employer would listen to a reasonable argument.
You also need to present you stressed boss with solutions.
Have you looked at all the transport alternatives?
Woul public transport be viable even if you need a taxi at each end?
Could you hire a car that doesn't cost 45ppm to run?
Could you even buy a second car?
We get paid 40ppm and I know someone who bought a cheap car and made a profit.
That may not be possible right now, but you need to think through the alternatives fully a present solutions rather than just dumping problems on your already stressed boss.

Another solution is simply to accept that this is aprt of your overall package that you have to subsidise the company.
Not ideal but there is not point getting stressed over things you cannot change.

I was very unhappy with the holiday arrangements at my current company.
But I liked everythihng about the current job, so I had to accept it.
I found a soultion which was booking my holidays far in advance which solved the issue.
Sometimes you might have to accept one minor thing you don't like for the sake of the job as a whole.
Is this the case here?
I'm not saying that's fair, but ideal jobs don't exist.

lisyloo

OK, but if your only getting 25p a mile you would have to drive 140miles a day just to cover the cost of the hire.

I agree.
As I said it depend largely on the pattern of driving.

It's also impractical for me to hire a car instead of using my own as hire places aren't open early enough in the morning or late enough in the evening so for every day I need a car I would have to hire for 2 days.

Ok, I may be lucky in that mine are a taxi firm and are open 24 hours a day.
Perhaps that solution won't work for everyone, but I do think it's a good idea to try to think of any solutions and not just present the boss with a big whinge.

If there are no other solutions then your choices are

1) accept it as part of the package
2) put a reasonable argument to your employer if you think it's worthwhile
3) change your car for something more economical
4) refuse to use your car (lots of my colleagues refuse to leave their wife & kids stranded and no-one thinks that's unreasonable).