Tax on Lease Car Mileage Allowance

atreides7887

Hello All,

Just a quick question here, and this may not be the right section of the forum. Previously I've been getting a lease car allowance from my employer. My car finally broke down and became uneconomical to repair and due to a lack of available money I decided to go for a lease car which I've now got.

My confusion is around how the mileage allowance works. I currently claim £0.38 per mile and this is obviously in excess of the advisory fuel rate of 11p based on fuel type and engine size.

Looking at the Gov website it says "If you pay rates that are higher than the advisory rates and can’t demonstrate the fuel cost per mile is higher, there is no fuel benefit charge if the mileage payments are solely for miles of business travel. Instead, you will have to treat any excess as taxable profit and as earnings for Class 1 National Insurance purposes."

I'm struggling to understand what this means. Is it that the difference (i.e. 27p p/m) will be in effect added to my income at the end of a tax year and treated as an underpayment for tax purposes - or does it just apply to National insurance? I assume the quote above is targeted at the employer and i'm struggling to understand how it will affect me.

Thanks in advance for any guidance.

Regards,
atreides7887

Bigphil1474

I think, as you say, it means that the 38p per mile will be treated as profit against the 11p a mile allowance, compared to the current 45p per mile allowance for non-leased cars. Presumably you've got a salary sacrifice scheme which reduces your tax and NI payments slightly anyway?
Where I work, if I used their lease scheme, they will only pay the 11p a mile rate anyway - might be worth checking if your employer is still going to pay the 38p/m. You will have your tax code reduced to take into account the extra 'profit' you are deemed to be making at the end of the year.