Working out business mileage

uktechnerd

I do a varying amount of business mileage in my job. I receive a car payment each month in cash (I didn't want the company car) and a price per mile. The price per mile is 13p but I'm told this is made back up through some tax thing. I don't understand how this calculated and why the employer doesn't include this price rather than the 13p for simplicity. Could somebody give me the formula to work out how much this 13p per mile will be topped up by or related documentation? The guides online aren't very much help because I don't know if the fact I receive the car payment makes any difference. Many thanks

HappyMJ

It's changed recently to 14p. It's the advisory fuel rates which you need to pay to your employer for the private use of the car so the employer is not giving you a benefit in kind

Previous rates here - https://www.gov.uk/government/publications/advisory-fuel-rates/advisory-fuel-rates-1-december-2009-to-31-may-2015

New rates here - https://www.gov.uk/government/publications/advisory-fuel-rates/advisory-fuel-rates-from-1-june-2015

spiro

You are receiving cash in lieu of a company car and therefore you receive a lower rate per mile compared to what can be paid if you don't get car allowance. Most companies pay the car allowance through payroll so that it is declared to HMRC and appropriate tax paid.

uktechnerd

I'm led to believe by colleagues that the price per mile (as you say: 14p) is topped up to something higher after some tax calculation. Is this true? Do you know how to calculate this? Or are they mistaken?

bob_a_builder

See section 5 here - is that what they are thinking of ?

http://www.parkers.co.uk/company-cars/news-and-advice/advice/2014/january/calculating-car-fuel-benefit-tax-and-reclaiming-business-mileage/

"and if you are paid a lower mileage rate you can claim tax relief on the difference.

uktechnerd

Yes I think that's it. I presume they are indeed mistaken then, as the 14p per mile is the official rate and what the company is actually paying, and the car payment is for general upkeep. Is that right?

bob_a_builder

If you are using your own car the figure should include depreciation etc
Normally figure is 45p / mile and you can claim the tax on the difference between that and what the company pays you

I take the car myself so don't do it myself but others here take the car allowance and claim tax as above


The lower AFR numbers apply if you are paying for own fuel in a company owned car

insert_random_name_here

Because your company pays you a car allowance it choses to pay you a lower amount per mile for the business miles that you do. HMRC doesn't care about your car allowance - you pay income tax on it, but it is not a company car.

For that reason HMRC will allow you 45p/mile for the first 10,000 miles and 25p/mile thereafter. Because you are getting a lower rate per mile you can claim back the difference through your tax return, or by writing to HMRC.

For example, if you do 10,000 miles your employer will reimburse you at £1,400 (14p/mile). According to HMRC you should have got £4,500. So you can claim back 20% (or 40% as a higher rate taxpayer) of the £3,100 difference, i.e. £620 or £1,240 at the end of the tax year.

Hope that helps.

uktechnerd

Exactly what I wanted, thanks! I'm probably being naive here but why do I only get the difference with respect to my tax rate back, rather than the actual difference? And, actually, what is the point in the government giving anything back at all given it's advisory? Also, is it normal for employers to actively claim this tax back each month on behalf of the employee? I think I've heard of this before.

insert_random_name_here

uktechnerd wrote: »

Exactly what I wanted, thanks! I'm probably being naive here but why do I only get the difference with respect to my tax rate back, rather than the actual difference? And, actually, what is the point in the government giving anything back at all given it's advisory? Also, is it normal for employers to actively claim this tax back each month on behalf of the employee? I think I've heard of this before.

You only get the tax back because that's the way it is unfortunately. HMRC are not known for giving away more than they need to!

The employer won't claim back the tax, you need to do it but thankfully it's really easy. All you need to do is fill in online form P87 (for expenses less than £2,500) a the end of the tax year.

If your expenses are higher then you'll need to do a tax return. Deep joy.

spiro

insert_random_name_here wrote: »

You only get the tax back because that's the way it is unfortunately. HMRC are not known for giving away more than they need to!

The employer won't claim back the tax, you need to do it but thankfully it's really easy. All you need to do is fill in online form P87 (for expenses less than £2,500) a the end of the tax year.

If your expenses are higher then you'll need to do a tax return. Deep joy.

I suspect he will need to do a tax return because his car allowance is 'paid in cash', which implies it's not going through payroll unless the company pay all wages in cash.