Relocation - increase in salary

seikothrill

Hi

It looks like I am being relocated to another Department which is just under 55 miles away from where I currently live.

The good news is that I am receiving a pay increase and my compnay has agreed to pay all travel expenses whist I commute which will potentially cost £10-12000 per annum.

My basic will increase to £35000 plus travel costs.

Would I be better off just asking for a basic salary of £45-47000 per or is it more tax efficient to have a lower basic of £35000 and get travel costs reimbursed?

Thanks for any help

EconomicsGirl

I believe travel costs are a taxable benefit so you'll pay tax on them at your marginal rate so it wouldn't make much difference in terms of tax. On £10k to £12k this could be around £4k extra tax to pay so watch for that, you may well want to try and negiotiate the firm pay this. Also HMRC rules mean you have to buy train tickets weekly, not sure why if you're going by train. £10k to £12k seems an awful lot for 55 miles.

If you have children having your basic salary raised by that much would stop your child benefit from Jan 2013.

Normally excess travel is only paid for a certain period of time - when I was offered it, it was for 4 years. I think there are HMRC rules about how long it can be excess travel for (after that they assume its your normal place of work).

EconomicsGirl

Also if you are being relocated out of London watch out for loss of London Allowance.

seikothrill

EconomicsGirl wrote: »

I believe travel costs are a taxable benefit so you'll pay tax on them at your marginal rate so it wouldn't make much difference in terms of tax. On £10k to £12k this could be around £4k extra tax to pay so watch for that, you may well want to try and negiotiate the firm pay this. Also HMRC rules mean you have to buy train tickets weekly, not sure why if you're going by train. £10k to £12k seems an awful lot for 55 miles.

My Company offer 0.48 per mile expenses so I did a rough calculation to obtain the 10-12K.

EconomicsGirl wrote: »

Normally excess travel is only paid for a certain period of time - when I was offered it, it was for 4 years. I think there are HMRC rules about how long it can be excess travel for (after that they assume its your normal place of work).

I did not know this.

Thank you for taking the time to reply to my OP

scheming_gypsy

I could be completely wrong here but here goes..

if they're offering 48p a mile then it's unlikely they'll give you the option of a 10k pay rise. They'll probably offset the 48p a mile / claim it back or whatever it is, so you'll gain the extra but it won't actually cost them that much

bap98189

seikothrill wrote: »

My Company offer 0.48 per mile expenses so I did a rough calculation to obtain the 10-12K.

Most companies pay that sort of rate only for the first 10,000 miles, which is in accordance with the HMRC approved mileage rates. After 10,000 miles the allowance drops to only 25p per mile.

If you are being paid in excess of these rates then your expenses will be liable for taxation. You may want to check this with your employer.

rs65

seikothrill wrote: »

My basic will increase to £35000 plus travel costs.

Would I be better off just asking for a basic salary of £45-47000 per or is it more tax efficient to have a lower basic of £35000 and get travel costs reimbursed?

I would bet your company would rather pay it separate from salary so your pensionable salary, sick pay etc don't change.

System

If the company leave it as a mileage payment then they can start reducing it when they wish. The OP would not be able to claim the difference between it and the HMRC rate as it is not a temporary workplace.

As said, at 48p/m you will be paying tax on it.

somethingcorporate

It's 2 years before it becomes established as your permanent place of work (it was on another thread I read today, cannot find it now!).

System

Relocation expenses can be claimed up to the end of the tax year after the year the move occurred. So the maximum that can be claimed is 2 years if the move happens on 6 April.

EconomicsGirl

On the HMRC's website it says a temporary workplace is one that lasts up to 2 years. As this is a permanent move looks like HMRC class it as ordinary commuting and the whole amount is taxable at your marginal tax and NI rates. I'ld check with HMRC and your workplace but if say they did give you £10k a year, you could get hit with a c£3k tax and NI bill. Some employers will pay this but when I was in the public sector they didn't pay it and also didn't warn you about it. Fortunately I found out in advance and got the relocation overturned.