Car allowance & fuel card in layman's terms

Diefe

Hi all,

Apologies if this is in the wrong section. A search on "fuel card" shows the majority of posts here.

Please can you help me to get my head around this... I've been trying to work it out for days.

I have just started a new job. As part of my package I get a car allowance and also a company fuel card.

Now, I think I understand the car allowance. It's just an extra, taxable, part of my pay, right??

The fuel card is the part that really confuses me. When I accepted the job, I thought that I would just use the card for business fuel, but apparently I pay for all my fuel using the card, and then tell the company my business mileage.

My colleague explained to me in a roundabout way that the company pays for all my business petrol and then, somehow, I only end up paying about 40% of the pump price for the personal usage. Surely this can't be right? Or is this another benefit that I wasn't even aware of??

Help!

Thanks,
David.

taxing

Hi

Basically, because the company is paying for your private fuel by letting you fill up your tank at their cost, they are effectively giving you additional pay (in the form of that fuel for private motoring).

They pay 100% of the private fuel but you have to be taxed (and nic'd) on the value of that fuel (as it is more pay) - so 32% of the value is taken for the taxman (being 20% tax & 12% nic).

So, for very £1 of private fuel you put into your car, it has a net cost to you of 32p

Regards.

P.S. If you are a high earner and pay tax at 40% and nic at 1% on top slice of your earnings then for every £1 of private fuel the cost to you would be 41p.

Diefe

Thank you taxing, that's much clearer!

I guess I got an extra benefit that I wasn't aware of! :j

Dave101t

im on private fuel too, but i rarely use it as its like a busmans holiday for me to drive on holiday.
take weekend trips to scotland or cornwall and it wont cost you a penny extra!

ipi1mb

Hi all, sorry if this is in the wrong area. I am about to start a new job, and will be paid a car allowance to cover purchasing / leasing a car, insurance, tax, maintenance etc BUT not fuel. I will be getting a diesel and have been told I can claim 12p per business mile for a vehicle of 1600cc or below. Is this correct? I am confused as to where the 45p per mile (up to 10k miles) fits in, and wondering if I could attempt to reclaim additional business mileage reimbursements direct from the Inland Revenue? Any help would be greatly appreciated.

dori2o

ipi1mb wrote: »

Hi all, sorry if this is in the wrong area. I am about to start a new job, and will be paid a car allowance to cover purchasing / leasing a car, insurance, tax, maintenance etc BUT not fuel. I will be getting a diesel and have been told I can claim 12p per business mile for a vehicle of 1600cc or below. Is this correct? I am confused as to where the 45p per mile (up to 10k miles) fits in, and wondering if I could attempt to reclaim additional business mileage reimbursements direct from the Inland Revenue? Any help would be greatly appreciated.

As you are funding the car not the employer( the car alowance is simply an extension to your salary and taxed as normal), you can claim tax relief on the difference between 12p and 45p for the first 10000 miles, and 12p and 25p for each mile thereafter.

You do this by completing a P87 claim form at the end of the tax year. This can be issued direct by HMRC following a telephone call from yourself, or by downloading the form from the HMRC website.

Make sure you keep a log of your mileage as HMRC will most likely request to see one for a first time claim to ensure you are claiming only what is due.

NOTE- if your total claim is for more than £2500 (at the current rates and based on what you get from your employer, if your business mileage is more than 7575miles), then the claim will have to be done via a self assessment form. You will need to advise HMRC that you wish to make a claim for mileage expenses in excess of the £2500 limit and they will send you the forms.

jennifernil

Diefe wrote: »

Hi all,

Apologies if this is in the wrong section. A search on "fuel card" shows the majority of posts here.

Please can you help me to get my head around this... I've been trying to work it out for days.

I have just started a new job. As part of my package I get a car allowance and also a company fuel card.

Now, I think I understand the car allowance. It's just an extra, taxable, part of my pay, right??

The fuel card is the part that really confuses me. When I accepted the job, I thought that I would just use the card for business fuel, but apparently I pay for all my fuel using the card, and then tell the company my business mileage.

My colleague explained to me in a roundabout way that the company pays for all my business petrol and then, somehow, I only end up paying about 40% of the pump price for the personal usage. Surely this can't be right? Or is this another benefit that I wasn't even aware of??

Help!

Thanks,
David.

As you say you are receiving a taxed car allowance, then I take it you are using your own car for work?

In that case you can claim tax relief on your business mileage @ 45ppm for the first 10000 miles and 25ppm thereafter. I would not have thought that having a fuel card alters that, but am prepared to be corrected if it does.

The 45p/25p is to cover the extra cost of running the car for business use.....extra fuel, insurance, servicing, wear and tear etc.

IF I am correct here, you should keep a record of business mileage, note that this does not include home/office travel. Also keep a note of the amount paid for fuel by your employer.

Say the car was driven 10000 miles in total in the tax year, and 5000 of that was business use.

Assume say average 40 mpg , petrol @ 135ppl, and a total fuel cost of approx £1535..........

You are allowed to receive 45ppm tax free....

5000 x 45p = £2250

Your employer has paid out only the £1535 for the fuel...

£2250 - £1535 = £715

So you have received £715 less than HMRC allow, you can therefore claim tax relief on that £715.

If you are on 20% tax = £143

on 40% tax = £286

ipi1mb

@ dori2o: Exactly the kind of detailed answer I was looking for, cannot thank you enough.