Courier mileage allowance - help!

frankie2789

TheCyclingProgrammer wrote: »

It seems what you’re asking is: can you benefit from the mileage allowance because the permitted allowance exceeds your actual vehicle costs?

The answer is, yes you can. Clearly if the total mileage allowance is higher you’re benefit from tax relief on a higher amount than had you just claimed relief for your actual costs. This is the nature of a flat rate simplified expense system.

Conversely you could lose out if your actual costs start to exceed the flat rate. This is why it’s important to be sure that the flat rate is right for you now and going forward (or until you change your vehicle).

I would focus less on the tax being saved me more on whether or not this is profitable long term. Because you only get paid when you’re carrying a load, this would probably require some clever planning and logistics to ensure you keep your time on the road unloaded to a minimum. Large courier firms do this using clever software and route planning systems but as a small independent driver you don’t have such an advantage.

Thanks a lot, yes I will indeed do those overall calculations. I just think it's interesting that the tax element of it is so generous in my particular situation. As mentioned earlier, the mileage allowance is intended to reflect the real overall cost of running a vehicle, and I am fortunate that it overestimates it in my case, particularly when I will do a lot of economical driving on motorways.

00ec25

frankie2789 wrote: »

Just to confirm the figures:
- First 10000 miles: £4500 allowance, £3000 income therefore £1500 loss for tax purposes
- Second 10000: £2500 allowance, £3000 income, therefore £500 profit for tax purposes
- Overall for first 20000 miles: £7000 allowance, £6000 income, therefore £1000 loss for tax purposes.

as an exercise on paper those figures are correct, you would have a £1,000 self employed loss which could be offset against employment income in the same tax year or, if there is not enough tax due on the employment income, the loss can be carried back or forwards depending on some precise rules.

as a real world position to be in it is not a sensible approach to earning a living as you appear to have not realistically factored in actual cash outflows other than fuel. As a self employed driver doing that sort of mileage your insurance will sky rocket, particularly if you are also carrying "goods" at the same time. You may for example find that using actual costs rather than the mileage rate will increase your tax loss, just don't expect to carry on like that forever or HMRC will say you are not a proper business trading with a view to making a profit and so they'd deny you your expenses.

frankie2789 wrote: »

I still don't understand how I'm 'totally wrong' about the second lot of 10000 miles giving a taxable profit of £500 with therefore £100 (20%) being payable in tax.

you're not, i mis-read what you said

gardner1

frankie2789 wrote: »

Hi everyone, sorry to post straight after joining but I have a question please.

I have been offered courier work where I would get 60p per loaded mile using my own car.

I notice HMRC have an allowance of 45p per mile up to 10000 miles then 25p per mile.

Obviously I understand courier work isn't particularly well paid, and there are lots of other costs like fuel, insurance, servicing etc.

However just regarding tax, it seems to be an almost tax-free job unless I am missing something! Can someone please let me know if I am mistaken about this?

So for example after I complete the first 10000 miles, the situation for the next 10000 miles would be as follows:
- Gross income: £3000 (60p per loaded mile for 5000 miles, then nothing for the return journeys)
- Tax allowance: 25p x 10000 = £2500
- Taxable income: £500
- Income tax to pay: £100
- Fuel costs: say 12p a mile so £1200
- Income minus fuel: £1800

In a 'normal' job, with £1800 income, the tax would be £360 but I would only be paying £100. So is the government basically letting me keep the difference (£260) for the extra costs associated with courier work eg insurance, servicing etc? I don't understand why it's so generous. It looks too good to be true - so presumably it is!

Thanks everyone,
Frank

What about the courier insurance which MUST include HIRE & REWARD should cost about £1000 plus for first timer plus liability insurance