Taxing/Mileage Allowance

jessrobbie_2

Please could somone clarify this possible situation...

I am a self employed service engineer doing 30 000 business miles per year.

I currently earn an ammount of money which is slightly less than the ammount required to bring me into the upper tax bracket of 40%.For this reason I claim Mileage Allowance Tax Relief at 22%,which gives me a nice rebate at the end of the year of £1980......22% of (10 000 miles @ 40p/20 000 miles @25p = £9000).

My question is this:

If I could earn a little extra money to bring my earnings into the 40% threshold(approx £200 only) then I would now be classed as a 40% tax payer.
Does this mean I can now claim Mileage Allowance Tax Relief at 40%,effectively,giving me a rebate of £3600.

An INCREASE of £1620 !!!!!.............yipee!! and only paying an extra £80 in tax.


Surely this is too good to be true....

Could any "tax guru's" please enlighten me.

THANK YOU

jennifernil

I would think you could only do that if you actually had that amount of earnings being taxed at 40%

Murdina

The mileage allowance is deducted from your profits and you pay tax on what is left. Do the sums both ways and compare the difference - think of it like that, not as the mileage allowance times 22% or 40%. As you are self employed you also need to remember that you pay class 4 NIC on what you earn - 8% on profits up to 34,840 and 1% thereafter.

jessrobbie_2

Thank you MURDINA.

What you say now makes obvious sense.

Knew it was too good to be true.
I must have been a fool thinking the TAXMAN would give you something for free.(Thank goodness we have Santa Claus !!)