Car Allowance Amount

GBR

Hi,
I am a freelance/self employed engineer the company i am working for is offering me a fixed monthly car allowance for use of my private car. With them refunding my fuel costs. Mileage will be around 30,000 business miles a year. What sort of money should i be looking for? I was looking at a focus/astra estate on 30,000 lease (maintainance) for around £380 inc vat so was thinking around £400-£450 to include insurance and breakdown cover. Any advice welcome.

marlot

Don't forget you'll be taxed on the allowance.

But on the other hand, if they're just paying fuel on the running costs you'll be able to claim some money back from the tax man.

skivenov

I'd go with what the taxman says.

41p/mile for the first 10k miles, then 25p/mile for the rest.

Deduct your projectted fuel spend from that (my Corsa diesel drinks about 12p a mile), and there's your number, tax free.

GBR

Thats coming out at £418 per month do you think i should add 20% . Apparently they will repay my fuel costs minus 20% , is that correct?

spiro

As you are self employed you should be billing the company for mileage you incur travelling to their site (use HMRC rates). If they pay you a car allowance this could hinder your self employed status if the Inland Revenue check into it.

k12479

spiro wrote: »

As you are self employed you should be billing the company for mileage you incur travelling to their site (use HMRC rates).

Would that be sufficient? I can't think of many companies that charge customers for mileage travelled other than taxis, couriers, etc. where transport is the business. Most businesses would class this as an overhead. The arrangement as mentioned appears it may have a whiff of 'hire and reward' about it.

spiro

k12479 wrote: »

Would that be sufficient? I can't think of many companies that charge customers for mileage travelled other than taxis, couriers, etc. where transport is the business. Most businesses would class this as an overhead. The arrangement as mentioned appears it may have a whiff of 'hire and reward' about it.

I think it depends on the nature of the contract. If you are contracted to work at location 'x' then I would expect to claim mileage if they wanted me to travel to other locations.
If you are working at 'x' every day and the 30k miles is communting to that site then I agree you cant claim anything and this should have been factored into your rate.
The other thing about the HMRC 45p/25p (it went up) mileage rate is this is just you can be paid tax free therefore there is nothing stopping you claim 45p/mile for the other company on every mile but then only paying yourself 45p/25p and the remaining 20p/mile just being income.

withabix

skivenov wrote: »

I'd go with what the taxman says.

45p/mile for the first 10k miles, then 25p/mile for the rest.

Deduct your projectted fuel spend from that (my Corsa diesel drinks about 12p a mile), and there's your number, tax free.

Sorry, you are wrong on two counts:

It's 45p for the first 10,000 miles.

You only get TAX RELIEF on this - ie 20% or 40% of the difference, depending on what your total income is.

withabix

GBR wrote: »

Hi,
I am a freelance/self employed engineer the company i am working for is offering me a fixed monthly car allowance for use of my private car. With them refunding my fuel costs. Mileage will be around 30,000 business miles a year. What sort of money should i be looking for? I was looking at a focus/astra estate on 30,000 lease (maintainance) for around £380 inc vat so was thinking around £400-£450 to include insurance and breakdown cover. Any advice welcome.

The tax man will suspect that you are actually an employee under this arrangement.

Hintza

I think withabix has a point. Time to talk to an accountant.