Car Allowance and claiming mileage tax back??

randomnut

Hello,

I have a few questions about claiming mileage tax back and car allowance. I have tried to do a lot of my own research before posting but it is getting very confusing, I hope you can help!

I currently do about 25,000 minimum business miles per year and I receive a car allowance of 7,200 gross p/a, which I use to get a car on hire purchase as my old banger wasn't up to the task in this new job.

I receive 15p per mile back which is the company mileage rate for a 1.7 diesel.

I understand, that I can claim the difference between 15p and 45p per mile (so 30p) up to 10,000 miles then 25p thereafter (so 10p).

Am I then right that after totting this up over the year, I am then claiming back the tax amount of the tax bracket I am in, rather than the whole amount? Ie 40% of the total?

Also, where does the car allowance come into this, do I deduct this from the amount claimed as prior reimbursement or is this seperate?

I have been told that if I am claiming back over £2500 than I need to fill out a full-on self assessment, can this be done just for mileage as I otherwise pay everything PAYE or is this a full on account of my finances, sounds very daunting :S This is the first year i'll have to have done one of these.

Many thanks

GRM

On 25k you'll be claiming back £1800 - you would need to be doing over 32.5k miles to claim back over £2500.

You're right that you get 40% (i.e. your tax bracket) of the amount back, not the whole amount.

Self assessment isn't _too_ bad, just fill in the boxes. Most of the info required is on your P60 and P11D.

BoGoF

The 45 pence per mile only applies from 6 April 2011 so if you are claiming for 2010-11 it will be 40 pence you are working on.

Is the car allowance tax through your salary? If so, you can ignore it for the purposes of calculating your relief.

You are correct in that you get tax relief at your marginal rate

The Self Assessment bit isn't as daunting as it sounds although you will need to declare any bank interest/dividends etc

BoGoF

GRM wrote: »

On 25k you'll be claiming back £1800 - you would need to be doing over 32.5k miles to claim back over £2500.

You're right that you get 40% (i.e. your tax bracket) of the amount back, not the whole amount.

Self assessment isn't _too_ bad, just fill in the boxes. Most of the info required is on your P60 and P11D.

Not sure where you're getting the £1800 from. The first 10,000 miles alone at 30p will already be £3000 in expenses

GRM

BoGoF wrote: »

Not sure where you're getting the £1800 from. The first 10,000 miles alone at 30p will already be £3000 in expenses

10000 x 30p = £3000
15000 x 10p = £1500

£4500 x 40% = £1800

From the OP I assumed £2500 related to the rebate not the expenses, apologies if this is wrong.

BoGoF

I assumed he meant £2500 of expenses as he then went on to say Self Assessment would be required and the £2500 expenses makes it that.

00ec25

GRM wrote: »

From the OP I assumed £2500 related to the rebate not the expenses, apologies if this is wrong.

sorry you are indeed wrong, the limit relates to the gross expenses not the tax rebate

If you are employed and want to claim for expenses or professional subscriptions of £2,500 or more, you'll need to complete a tax return. (You can just write to HMRC, with full details, if you want to claim expenses below this amount.)

randomnut

Thanks a lot for the very helpful replies.

It makes sense how and what to claim, although I am still bemused as to why we are able to actually claim this money back, if the employer has already re-imbursed 15 pence per mile for the fuel?

Does this same thing apply to other expenses as well as fuel then, for example hotel nights I have had to pay for that have been reimbursed by the employer?

thanks

Regshoe

The 40p/45p a mile is an estimated average of what HMRC thinks the mileage really costs you. You've received 15p per mile for fuel, but HMRC's estimates say there is around 30p of other costs (increased depreciation, servicing costs etc etc). So they say you should be allowed up to 45p a mile.

You (i imagine) see these additional costs as being covered by the £7200 allowance you get - but this will just be treated as additional income and taxed at 20/40%, the fact that your employer has given you this specifically for car costs doesn't matter. Don't think I explained that very well but I hope you understand what I'm trying to say!

As for other costs - you can claim them back, as long as they were specifically required to enable you to carry out your employment and they weren't reimbursed by your employer. So if your hotel costs have already been reimbursed then you can't claim them as taxable expenses - as they haven't cost you anything. The difference here is that your reimbursed T&S will not have been taxed (assuming the reimbursement was reasonable and met a few other rules) - whereas your car allowance was taxed.

Check out:

http://www.hmrc.gov.uk/incometax/tax-allow-ees.htm

randomnut

Thanks for that!

It makes a lot more sense. If the HMRC ignore the car allowance, I don't understand then why it is only a percentage of the difference that can be claimed back if they consider the whole 45ppm as the cost of using your car?

I've heard of some people just not claiming back fuel rates via the employer and doing the whole 45ppm via hmrc. Is this possible/legal/wise?

BoGoF

randomnut wrote: »

I've heard of some people just not claiming back fuel rates via the employer and doing the whole 45ppm via hmrc. Is this possible/legal/wise?

I'm afraid you haven't heard correctly. HMRC will not pay and have never paid you the approved mileage rates. These are the maximum amounts your employer can pay you tax free. If they pay you less then you can claim tax relief on the difference. Tax relief depends on your tax rate.

You should be asking your employer why the pay you less than the approved mileage rate, although your £7500 allowance cushions the blow.