Car Allowance and claiming mileage tax back??

zbirdy

Hi Guys,
Im new to the whole system, and I am about to be given the option of a Car allowance, I have no idea how much, but I feel my employer will recognise that the job I do warrants a decent car to be purchased, so im hoping its pretty generous. from reading the above, it would be better to have this lump sum paid through my salary wouldnt it, as the tax will be calculated at source, and save me the hassle of form filling later ?

Also, Am I at liberty to request the whole 45ppm from my employer ? (he is fairly easy going and generous, and we have a fair respect for each other) or is not his place to pay the whole amount ?

Sorry chaps this is all a bit over my head Im afraid. Help would be appreciated.

thenudeone

zbirdy

The rates represent what hmrc accepts is the true average cost of travelling those miles. In reality, everyone's costs are different.

You can ask your employer for whatever you want but he/she doesn't have to agree.

They can also pay whatever they want (£100 a mile if they want to) but if they pay more than what hmrc accepts are the true costs of the travel (usually shown by the mileage rates) then you will have to pay tax on the excess (otherwise every employer would just pay huge mileage allowances with a tiny salary, to avoid their employees paying income tax!).

If your employer pays less than the approved rate (or nothing) you can claim the difference as an allowable expense on your tax return, just like any other expenses such as professional indemnity insurance, professional subscriptions, or washing a uniform at home.

The mileage rates are not compulsory on employers, nor are you tied to those rates for tax purposes (although nearly everyone uses them). If you genuinely need a very high end luxury car for your job, or have much higher costs (perhaps your insurance costs a fortune?), you can propose a different set of costs as allowable expenses, then wait for the argument with hmrc!

The least form-filling is achieved by paying a mileage allowance within the hmrc bands (which is not taxed) and some car allowance (which is taxed).

The mileage allowances on their own should be generous enough provided you will do enough business mileage. If you just need a high-spec car for occasional travel to customers, it won't be enough to cover the extra costs you incur, and a car allowance would be needed to cover it. In that case you could argue with hmrc for some extra allowances for having to buy a high end car which is rarely used.

anniecave

randomnut wrote: »

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?

A company will likely have a policy which says that employees without a car allowance can claim mileage at one rate (say 45p) but the employees with a car allowance can only claim a lesser amount (say 15p).

A major part of the cost of the mileage is the cost of the car, so that is why if the employer is giving you an allowance for the car, they won't also give you mileage at 45p as otherwise they are giving you the same money twice!

As the allowance is taxable, that is why you can reclaim the tax only back from HMRC on your business miles only.

zbirdy

Great help folks, thank you.
zbirdy

rs65

have a look at hmrc advisory fuel rates

http://www.hmrc.gov.uk/cars/advisory_fuel_current.htm

and the P87 form

hazyclaire

Hello,

Thanks for all the above posts, they have been very helpful to me whilst trying to work out how much I can reclaim on my mileage expense for the year.

But just to confirm, having done 25,000 business miles claimed from my employer at 20p per mile, are my below calculations correct?

10,000 x 25p = £2500
15,000 x 5p = £750

Total = £3270 x 22% = £719.40 to reclaim

Thanks for any help

Claire

00ec25

hazyclaire wrote: »

Hello,

Thanks for all the above posts, they have been very helpful to me whilst trying to work out how much I can reclaim on my mileage expense for the year.

But just to confirm, having done 25,000 business miles claimed from my employer at 20p per mile, are my below calculations correct?

10,000 x 25p = £2500
15,000 x 5p = £750

Total = £3270 x 22% = £719.40 to reclaim

Thanks for any help

Claire

does the total mileage your are claiming all fall within one tax year and which one is it: 10/11 or 11/12?

what ever makes you think income tax is 22%?? It is either 20 or 40% and has been for ages

hazyclaire

Ha I'm not sure! Must have been having a moment!

It is all 2011/12 mileage and I am in the 20% tax bracket.

Thanks for your help

00ec25

hazyclaire wrote: »

Ha I'm not sure! Must have been having a moment!

It is all 2011/12 mileage and I am in the 20% tax bracket.

Thanks for your help

you will get tax relief of £654 and will have to claim this via SA tax return

hazyclaire

Thank you!

Do you know whether I can claim now, or whether I have to wait til the end of the tax year? I have changed jobs so won't be doing any further business miles this year.

Thanks