Mileage and Tax

scaredofdebt

I'm shortly starting a new job that will involve me using my own car for business purposes and I could well be doing more than 2,000 miles monthly. I have got the car insured to cover me for this, but wonder what the implications are regards tax.

My car costs about 12p a mile to run purely from a fuel point of view and the company will reimburse me 16p a mile so I am making a small profit, but not when you take into account all the other running costs.

I've got a 2 litre diesel.

When I do my tax return, how does the mileage affect my tax?

Thanks for any advice.

00ec25

As your company is only paying you 16ppm this is below the HMRC approved mieleage rates which are 45ppm for the first 10,000 miles per tax year and 25ppm thereafter.

You are therefore entitled to claim a tax rebate for the difference between the 2 figures, ie you can claim for the tax on 29ppm for the first 10,000 so as a basic rate tax payer you would get back 10,000 x £0.29 x 20% = £580 (or £1160 if higher rate 40% taxpayer)

If you are not currently required to fill out a tax return then you can claim this using a separate form (P87) rather than having to do a full tax return

Note you get back the tax, you do not get the full 29ppm. The size and type of your car is irrelevant as are its running costs and your "profit" figure.

you must keep a log of the business miles you claim as proof to support your HMRC claim (ie keep a copy of every expense claim you submit to your company assuming that you are required to list the details of each journey, if not you will need to keep a separate log at that level of detail)

see guidannce and form here: http://www.hmrc.gov.uk/mileage/index.htm

CKhalvashi

00ec25 wrote: »

As your company is only paying you 16ppm this is below the HMRC approved mieleage rates which are 45ppm for the first 10,000 miles per tax year and 25ppm thereafter.

You are therefore entitled to claim a tax rebate for the difference between the 2 figures,[STRIKE] ie you can claim for the tax on 9ppm for the first 10,000 so as a basic rate tax payer you would get back 10,000 x £0.09 x 20% = £180 (or £360 if higher rate 40% taxpayer)[/STRIKE]

You can claim 29p for the first 10,000 miles and 9p after.

On 30,000 business miles, you would work out as followed:

10,000 x £0.29 x 20% (40%) = £580 (£1160)
20,000 x £0.09 x 20% (40%) = £360 (£720)

Total = £940 (£1880)

If you are not currently required to fill out a tax return then you can claim this using a separate form (P87) rather than having to do a full tax return

Note you get back the tax, you do not get the full 9ppm. The size and type of your car is irrelevant as are its running costs and your "profit" figure.

you must keep a log of the business miles you claim as proof to support your HMRC claim (ie keep a copy of every expense claim you submit to your company assuming that you are required to list the details of each journey, if not you will need to keep a separate log at that level of detail)

see guidannce and form here: http://www.hmrc.gov.uk/mileage/index.htm

Just the figures slightly wrong.

I have corrected in red for OP.

CK

scaredofdebt

Great thanks, that makes sense.

I currently run an 8 year old car with 183k on the clock and would like to get something newer as I expect mine will probably be bound for the scrap heap fairly quickly with the mileages I may be clocking up.

Are there any tax breaks available for someone in my position or is there a best way to go, ie leasing, buying new etc etc

jennifernil

You can only claim the tax relief on the 45/25ppm minus what you are paid, as stated. There is no other relief. It's up to you how you finance the purchase of the vehicle.

CKhalvashi

scaredofdebt wrote: »

Great thanks, that makes sense.

I currently run an 8 year old car with 183k on the clock and would like to get something newer as I expect mine will probably be bound for the scrap heap fairly quickly with the mileages I may be clocking up.

Are there any tax breaks available for someone in my position or is there a best way to go, ie leasing, buying new etc etc

Unfortunately not.

I have a good idea as to what you drive from the given info (Mondeo TDCi?) and they're good little cars. OH had one with this engine and it lasted 300k.

CK

John_Pierpoint

Unfortunately, if you are "representing" (selling ?) something you tend to get judged by the state of the vehicle, especially if it has a give away year character in its number plate. First impressions unfortunately do count - it is like "curb appeal" when selling a house.

I do recommend diesel engines - they should go on and on BUT they are only as good as the engine management system, wrapped round them.
I too have a Mondeo diesel and it has done about 170k miles HOWEVER after 9 years of completely trouble free motoring (ie only servicing and normal wear and tear - worst problem: screw fell out of visor mount into cigar lighter and fused that and several other accessories:eek::D) engine simply cut out in the arterial road fast lane.
Towed back to Ford main dealer and "engineers" (muppets) who believe what they see on the computer screen. It is your fuel filter I don't think so that was replaced at the last service - actual problem was "the electrical lift pump" ( you might not have one of these) so NINE days later the car was back on the road and I was about £500 out of pocket. A few weeks later the engine started cutting out at random it is your knock sensor - so that was replaced but did not cure the problem - time to find someone with experience working out of a railway arch.
Agreed that it was not worth paying 4 figures to replace the electronics, which were reporting a nervous breakdown, so I set a budget of £500 and paid £400 to have some rewiring done.
Result: Car still on the road but starts from cold like an old tractor.
18 months later I only use it these days for load lugging - wife has a posh little stretched Golf thing for ordinary domestic purposes.

So I think you might well be in the position of needing to trade up to something newer, as you will be depending on it for your living.
At the moment your car is "clean" and it presumably has a residual value greater than its scrap value?

uwais_2

Hi scaredofdebt,

I can see from your point of view as you think you will be getting back a lumpsum to cover your expenses,but these days those figures which have been calculated for you by CKhalvashi are not coming back as a cheque instead that will be added to your tax code.I have been trying to claim for the past 3 years and all I get is a new tax code.
I am sorry i have said this but I had the same expectation that I was feeling in using my own pay and at the end of the tax year the money that I have used to fill in will be reimbursed back to make a savings but I was wrong.

But I guess everyone has their own luck.
Good luck to you and hope everybit of your new job is worth it.

CKhalvashi

uwais wrote: »

Hi scaredofdebt,

I can see from your point of view as you think you will be getting back a lumpsum to cover your expenses,but these days those figures which have been calculated for you by CKhalvashi are not coming back as a cheque instead that will be added to your tax code.I have been trying to claim for the past 3 years and all I get is a new tax code.
I am sorry i have said this but I had the same expectation that I was feeling in using my own pay and at the end of the tax year the money that I have used to fill in will be reimbursed back to make a savings but I was wrong.

But I guess everyone has their own luck.
Good luck to you and hope everybit of your new job is worth it.

Yes, this is an important point.

I did get mine back by cheque last year, but mine was over £10k (!) I don't think OP has any chance of doing just under 100k miles though!

CK

scaredofdebt

Thanks everyone.

Yes, it's a Mondeo 2.0 TDCi, 04 plate, just cost me £300 for the MOT but that's not so bad I expect for the age and mileage. The car is tidy but it's a CAT D write off so value is minimal.

It's in good condition for the age and mileage and quite tidy so potential customers won't be too alarmed by it and it's certainly not flash so that won't be an issue either!

My upper end expectation is to do around 50k miles annually but it could be more, I'll know in a few weeks.

I'll probably get a new shape Fiesta diesel in a few months if the job turns out OK, I can get a high mileage one of those for around £5k and it alleges ~70 MPG.

Thanks.

mark55man

As a salesman this probably doesn't apply to you, but you may have some time in the office, in which case my experience (working out of a variety of offices).

Don't forget that you can only include miles that are not to your normal place of business (the definition of which is complicated but for me means that I can't claim this additional refund from one of the offices I visit (40%) as it is expected I will be doing this for more than 2 years - even though I am not past 2 years yet)