Car allowance/Expenses- Tax Credits

LolStevo

Can anyone help me work this out?

I start a new job next week so need to work out what to tell tax credits as at the moment i rely on my tax credits to help pay nursery fees so will be lost without them!

Anyway my job is £22k/ year plus £3520 car allowance OR a company car.

I think i am going to have to take the car allowance as i have a car on PCP that i cant get out of just yet!

Anyway do i add this to my salary or is this separate? And what if i were to take the car do i declare that too?

Hope you can help! x

Caz3121

If you take the car allowance, this becomes part of your taxable income
If you take the car then the cash equivalent value gets added to your income
https://www.gov.uk/guidance/tax-credits-working-out-income

LolStevo

Caz3121 wrote: »

If you take the car allowance, this becomes part of your taxable income
If you take the car then the cash equivalent value gets added to your income
https://www.gov.uk/guidance/tax-credits-working-out-income

So either way i declare the cash amount to tax credits.

Thanks

Stroller133

Taking the allowance is much better for tax credits. The company car value will be added to your salary - end of story! The allowance is initially added to salary but may be reduced depending on how many miles and at what rate expenses are paid. If you still get 0.45/mile then it will stay as earnings, however if you get just fuel , say at 10p/mile then you can reduce your earnings by the remaining 35p/mile. This would result in a tax refund of 7p/mile (20% tax payer) and just over 14p mile in extra tax credits when compared with your payments based on salary + allowance.

This situation can result in payments reducing in April each year as the TC office gets your P60 value and its higher than the real adjusted earniings so therefore your new provisional payment is lower and they assume you've been overpaid until you renew, which can be in July.

Darksparkle

Stroller133 wrote: »

Taking the allowance is much better for tax credits. The company car value will be added to your salary - end of story! The allowance is initially added to salary but may be reduced depending on how many miles and at what rate expenses are paid. If you still get 0.45/mile then it will stay as earnings, however if you get just fuel , say at 10p/mile then you can reduce your earnings by the remaining 35p/mile. This would result in a tax refund of 7p/mile (20% tax payer) and just over 14p mile in extra tax credits when compared with your payments based on salary + allowance.

This situation can result in payments reducing in April each year as the TC office gets your P60 value and its higher than the real adjusted earniings so therefore your new provisional payment is lower and they assume you've been overpaid until you renew, which can be in July.

Without knowing the figures you can't make such a blanket statement.

Both the allowance and car benefit are counted as income. It would be the value of each that could make a difference.

Fuel benefit/mileage is dealt with separately.

You don't include mileage as long as it's paid within HMRC rates. So whether that's 45p per mile or 10p per mile, it's not included. However it isn't deducted from the car allowance or car benefit.

So if you get a car allowance of £3,000 plus mileage of 45p per mile then you declare the £3,000.

If you get a car benefit of £3,000 plus mileage of 11p per mile (1400cc or less) then you still declare the £3,000.

However if you get car and fuel benefit this is likely to be higher however you'd have to factor in the reduxtion of tax credits compared to no longer having to pay for a car, fuel, insurance, repairs, MOT, road tax etc. All of which you'd still need to pay with the car allowance/mileage.

Icequeen99

Darksparkle wrote: »

Without knowing the figures you can't make such a blanket statement.

Both the allowance and car benefit are counted as income. It would be the value of each that could make a difference.

Fuel benefit/mileage is dealt with separately.

You don't include mileage as long as it's paid within HMRC rates. So whether that's 45p per mile or 10p per mile, it's not included. However it isn't deducted from the car allowance or car benefit.

So if you get a car allowance of £3,000 plus mileage of 45p per mile then you declare the £3,000.

If you get a car benefit of £3,000 plus mileage of 11p per mile (1400cc or less) then you still declare the £3,000.

However if you get car and fuel benefit this is likely to be higher however you'd have to factor in the reduxtion of tax credits compared to no longer having to pay for a car, fuel, insurance, repairs, MOT, road tax etc. All of which you'd still need to pay with the car allowance/mileage.

Isn't Stroller's point that in your example with £3000 plus mileage of 11p per mile you can then deduct 34p per mile?

Edited to add: the mileage is of course deducted from employment income, not just the £3000

IQ

Darksparkle

Icequeen99 wrote: »

Isn't Stroller's point that in your example with £3000 plus mileage of 11p per mile you can then deduct 34p per mile?

IQ

Equally you could do the same if no mileage is paid for a company car. You could deduct the advisory fuel rates for business miles. So for example 11p per mile for 1400cc or less.

My point was, without knowing the facts and figures, you can't simply say the allowance is better.

Icequeen99

Darksparkle wrote: »

Equally you could do the same if no mileage is paid for a company car. You could deduct the advisory fuel rates for business miles. So for example 11p per mile for 1400cc or less.

My point was, without knowing the facts and figures, you can't simply say the allowance is better.

Yes agreed!

IQ