Tax Free Allowances

Cybernezz

Hi Guys,


I'm new here - but have enjoyed this website quite alot in the past - finding some really useful help from everyone and the forum. :T

I've got a Tax Allowance question - Tried getting help from HMRC - but the guy I spoke with wasted my time and cost me quite alot on the phone no doubt...



Currently I just creap into the upper 40% tax bracket with my salary - and I'm the only one in our household that works. We have always felt that having my partner at home will be better for our 2 kids in the long-run.

I currently have a Company car + fuel card that includes private mileage - but have the option to 'take the cash' and maintain my own car.


My question on tax relief is-
I drive c30,000 business miles per year. The company I work for allow .15p per mile - thus I can claim from HMRC .30p for the first 10,000 miles & 10p for the remaining 20,000 = £5,000 in relief from HMRC.


Some that I have spoken to have claimed their relief is built into their tax code. Some have received cheques back.

Given I can show my 30,000 miles for the next tax year now - If I was to show this to HMRC - would they factor that into my code?

AND

If that was the case on a 44,000 basic wage - would that move my lower/upper tax brackets - i.e.:

Allowance = £7,475 + £5,000 = 12,475
Basic wage = £44,000
Less bottom up allowance = £31,525 - Thus all at lower tax?



Sadly we are one of the families that will lose child benefit in 2012/13 and I want to do our best to continue with that but also maximise the salary that I go out and earn!!



Thanks in advance for all of your help!!!

jennifernil

That sounds reasonable, but have you also considered how buying and running your own car will compare with having the company car cost-wise?

Cybernezz

jennifernil wrote: »

That sounds reasonable, but have you also considered how buying and running your own car will compare with having the company car cost-wise?

Hi Jennifernil,

I have to a degree. What I haven't got too tied up about is the depreciation. As long as the car I buy is cheaper than the total received from the company - then I consider that a free car! - Infact a bonus that I can sell it on at the end and personally pocket the money!


I have calcualted that if I take the company offered car, then more of my salary goes into 40% bracket, and all of my car costs are factored at 40% Tax. Thus - a company car would cost me £4,830 each year.


If I opt out, I instantly get £4,830 back + the company provided allowence + the company & HMRC fuel benefit. If the benefit is added to my tax as above, then all of my salary will be at 22%.
I predict my own car could cost upto £6,300 per year - but the saving in Tax is £1,100 alone.


What's your thoughts Jennifernil? - & thank you for your help!!

CLAPTON

I don't understand your numbers

if you have a company car and fuel benefits then these will be benefits in kind. Also you can't claim mileage at 45ppm.

if you are going to take the cash instead of the company car then that will be taxable in addition to your basic salary

Cybernezz

... And I forgot to mention - I save the £1700 child benefit too - given my wage is all into 22% tax?


It all sounds too good to be true

Cybernezz

CLAPTON wrote: »

I don't understand your numbers

if you have a company car and fuel benefits then these will be benefits in kind. Also you can't claim mileage at 45ppm.

if you are going to take the cash instead of the company car then that will be taxable in addition to your basic salary

Hi Clapton.


Yes I understand the BIK side of it, and have that figure based on a diesel car - 156co2 + fully expensed fuel to be £4830 @ 40%.

Ref the 45ppm - I believe its 40ppm currently and set to rise in april according to HMRC website.
Also appreicate I can claim the difference i.e. 40ppm currently less the company provided allowance or .15p.



I've taxed my additional allowence too.



Would it make more sense if I loaded up the spreadsheet that I'm using?

I'll give it a go.

CLAPTON

Can you spell out the figures; it would then be easier to understand

if you take the company car what is the benefit in klind?

if you don't what is the cash allowance they give you

what is you salary

and standard rate tax is 20%

CLAPTON

we'are overlapping posts here!

Cybernezz

Hi Guys,


I thought it might be easier to share the spreadsheet I'm using but I can't seem to upload it here.
I've taken a screen shot of it, its the best I can do at the moment?
Please let me know if you have trouble reading it.

Ah because I'm a new user it won't let me put links in

maybe you can see the following - please add http://

s123.photobucket.com/albums/o311/cybernezz/?action=view&current=fbba0045.jpg

Cybernezz

Hello again,


I thought I'd have another go at making the image better quality/easier to read.

you would need to add http before the text below and copy paste into your explorer.

I hope MSE doesnt think I'm breaking any rules here - my understanding is links are disabled to prevent autobot/advertising and I am not trying to do that at all.


/i123.photobucket.com/albums/o311/cybernezz/tax.jpg

jennifernil

Hmm, I am struggling with your figures, though I can read them OK.

First, tax basic rate is 20%, so you need to correct that.

As I see it.....if you take the company car.....

you have salary plus car benefit plus fuel benefit minus pension contributions....

work the tax and therefore nett salary on that

then you may lose your child benefit, but there seems to be a possibility of some movement on that for sole earners (news today)

if you don't take the car......

you have salary plus car allowance minus pension contributions.....work the tax on that

then you get 15ppm from employer to add on, that's £4500 tax free, and you get tax relief on the £5000 at your marginal rate of20% or 40%, so you save either £1000 or £2000 in tax, or somewhere in between, depending on where it leaves you after extending you tax free allowance

but.....

you have to buy the car, and insure it, tax it, service it, pay for new tyres,brakes etc etc, and depreciation.

and you have to budget for changing the car every so often

and of course you have to pay for all that fuel, and your private fuel which presumably your employer covers at present via the fuel card.

these are significant costs, so you do need to put figures on those to get the true picture