Car Allowance and Mileage Allowance Relief

acidstrato

I'm new to using my own car for work and admittedly I don't fully understand it.

I get £6000 a year car allowance paid monthly
Fuel Card which I purchase all my fuel on
- Up until April '14 I didn't pay for any personal miles, just a £30 fuel deduction each month.
I have done 15,000 business miles up to April I estimate I will be doing 25 - 30,000 miles a year for business.

I don't know if the company pay mileage rates to those who get car allowance and have a fuel card.

I pay tax, NI and student loan on the car allowance

Am I entitled to claim MAR from HMRC for the 2013-2014 tax year?

From April 'TMC' have been employed to manage car allowance payments, recording business mileage and deducting for personal mileage

thanks to those who can help and if you have a similar policy please let us know how you work it?

do you buy your cars or lease? any good deals?

jennifernil

(NOTE: The original post number 2 has been deleted. For mine to make more sense, post 2 originally said that the OP could not claim anything as he had a car allowance towards his car costs and fuel paid by employer, so was already fully compensated. I then replied as follows........)




I don't think that is entirely correct.

If the "car allowance" is fully taxed, then, whatever you call it, it is just extra salary.

If the OP is providing and paying for his own vehicle to use on his employer's business, he is still entitled to claim the full HMRC approved mileage rate, minus any contribution for fuel made by his employer. Anything he receives for fuel for private mileage will also need to be deducted.

He is entitled to receive the 45/25 ppm tax free when using his own car, the fact that his £6000 "car allowance" is taxed, removes it from the equation.

jimmo

You seem to have 3 separate issues here.
1) As jennifernil says the usual system is that car allowances paid by employers are taxed as pay.
2) For employees who drive their own cars but use a company fuel card the amount that the employer pays for fuel, after deducting anything you pay them back, is a benefit in kind and taxable.
3) As you drive your own car for business you are entitled to claim MAR from HMRC.
Whilst it would be quite interesting to know why your employer charged you £30 per month the reason is not important for tax purposes as long as they take it into account when declaring your benefits in kind on form P11D.
Having said that there seem to be all sorts of variations in how employers actually report to HMRC but if you keep those 3 principles in mind I think you will make sense of it.

acidstrato

AFAIK the £30 is not calculated. I imagine it is a figure they must have pulled out of a hat. I questioned it in my first wage slip and the boss just said its a deduction to stop the fuel card being classed as a 100% benefit in kind

quote from the Company Car Policy:

All employees are required to contribute an amount per monthtowards the private use of a company vehicle and fuel, based on their privatemileage. This deduction will be shown on the payslip.

I know this seems odd since it's my own car however another part of the policy states the company may treat my car as a "company vehicle"

anyway, for those who did lots of personal miles it worked in there favour but as I did very few (probably on average less the £30 worth) it worked against me.

Yes the car allowance is just added to my basic pay and then all my deductions are taken away to leave me with a net pay.

A colleague said I should receive a copy of the P11D around June and then I could claim something from HMRC which I assume he was referring to MAR. But I have no idea how this works.

acidstrato

thanks jennifernil for pointing out the deleted post yours makes a lot more sense to me now.

So bottom line is, once I receive a copy of the P11D I will be able claim MAR from HMRC for the business mileage which is

10,000 x 0.45 and 5,000 x 0.25 = 4750
minus Tax and other deductions


Hopefully this is correct as my car allowance might be 500 per month but once tax, NI and student loan is deducted I only see about £310, that is not a lot to cover a vehicle and it's running costs which I wouldn't have to worry about if I had a company car.

CLAPTON

acidstrato wrote: »

thanks jennifernil for pointing out the deleted post yours makes a lot more sense to me now.

So bottom line is, once I receive a copy of the P11D I will be able claim MAR from HMRC for the business mileage which is

10,000 x 0.45 and 5,000 x 0.25 = 4750
minus Tax and other deductions


Hopefully this is correct as my car allowance might be 500 per month but once tax, NI and student loan is deducted I only see about £310, that is not a lot to cover a vehicle and it's running costs which I wouldn't have to worry about if I had a company car.

well no not really


the 4750 is an expense which is set against your tax ; so if you are a 20% tax payer your tax will be reduced by 4,750 x 20%

Caz3121

acidstrato wrote: »

10,000 x 0.45 and 5,000 x 0.25 = 4750
minus Tax and other deductions

you also need to deduct the amount paid by your employer. I expect this will somehow be the total value of the fuel less the personal contribution

so based on your figures above
If your fuel card spend is £2400 and the personal mileage is £400 then your total will be £4750 - £2000 = tax relief on £2750 which at 20% taxpayer would be a refund of £550

jennifernil

http://www.hmrc.gov.uk/incometax/relief-mileage.htm

take a look here for explanations.

You are entitled to be paid the official rates tax free, not to have any shortfall reimbursed. This is the bit most people do not understand.

Your employer no doubt feels that by giving you a car allowance and paying for fuel, they have reimbursed you, but as your car allowance was taxed, you can claim back some of that tax.

acidstrato

Apologies for being a little simple on this topic but I just cant get my head around it without a real exaple.

Some sources say you're entitled to the actual sum (miles x approved rates) which is a relatively large amount, other sources say it's just a relief on the sum you are entitled to which isn't a lot.

According to the hmrc web page

"For example, you use your own car for 900 business miles and your employer pays you 30p per mile. The approved amount is £405 (900 times 45p). The allowance you get from your employer is £270 (900 times 30p). Your Mileage Allowance Relief is £135 (£405 less £270). The Mileage Allowance Relief will reduce the amount of income you pay tax on, so your tax bill will reduce by £135 at 20% (if you're a basic rate taxpayer) or at 40% (if you're a higher rate taxpayer) and at 45% (if you're an additional rate taxpayer)"

Comparing my own situation to the above, since I get no contribution from my employer as far as I'm concerned, I should have my "tax bill" reduced by £4750
(though I could be wrong and perhaps the Fuel spent on business miles paid for by the company is classed as a contribution as Caz3121 mentioned)

In any case I don't understand what they mean by "Tax bill" and whether this means I will simply pay £4750 less Tax OR if my tax code will be adjusted so that I don't pay tax on an extra £4750 even though I AM paying tax on the £6000 car allowance.


my final question on this topic is how automated is this process?

I will get a P11D in a few weeks, then do I have to fill in a P87 form and ship that off or do I need to file a tax return?

thank you for baring with me

acidstrato

the other information I have seen is here mileageallowanceclaims couk
whilst I have no intention of using this service as they charge 25%! But the site has plenty of information I just don't know if its accurate

CLAPTON

acidstrato wrote: »

Apologies for being a little simple on this topic but I just cant get my head around it without a real exaple.

Some sources say you're entitled to the actual sum (miles x approved rates) which is a relatively large amount, other sources say it's just a relief on the sum you are entitled to which isn't a lot.

According to the hmrc web page

"For example, you use your own car for 900 business miles and your employer pays you 30p per mile. The approved amount is £405 (900 times 45p). The allowance you get from your employer is £270 (900 times 30p). Your Mileage Allowance Relief is £135 (£405 less £270). The Mileage Allowance Relief will reduce the amount of income you pay tax on, so your tax bill will reduce by £135 at 20% (if you're a basic rate taxpayer) or at 40% (if you're a higher rate taxpayer) and at 45% (if you're an additional rate taxpayer)"

Comparing my own situation to the above, since I get no contribution from my employer as far as I'm concerned, I should have my "tax bill" reduced by £4750
(though I could be wrong and perhaps the Fuel spent on business miles paid for by the company is classed as a contribution as Caz3121 mentioned)

In any case I don't understand what they mean by "Tax bill" and whether this means I will simply pay £4750 less Tax OR if my tax code will be adjusted so that I don't pay tax on an extra £4750 even though I AM paying tax on the £6000 car allowance.


my final question on this topic is how automated is this process?

I will get a P11D in a few weeks, then do I have to fill in a P87 form and ship that off or do I need to file a tax return?

thank you for baring with me

the HMRC example you quote is 100% clear

you gain tax relief on the amount which means that actaul reduction in tax is either 20%, 40% or 45% of the mileage relief amount.


the tax relief at 45p for the first 10,000 etc included all the costs of running the car including petrol.
as you don't pay for your own petrol the benefit of this is netted off your mileage allowance relief.