Claiming Tax relief on Business Mileage

Pauli354

I am currently investigating moving from my company car scheme to a car allowance scheme.

I have done the sums and the company car is simply working out too expensive. By moving to the Car cash allowance scheme I will be removing the punitive co car tax I am being hit with, I will save the PUC payment I am making, I will then receive a car allowance towards my own car (but for business use), I will regain my full tax free allowance on a code of 1185L and I can also claim substantial tax relief on my business miles, as my company currently only pays me 13p per mile. By doing this, I have calculated a saving of £400 per month.

I have two questions.

1. Can I claim the tax relief in advance for 2018/19 (with appropriate adjustment made via self assessment next year), or will I have to do without the tax relief payment until next years tax date? Also is the rebate paid to me by chq or via an adjustment in the next years tax code? I suspect I will be claiming relief on about £5000 and as a 40% tax payer.

2. I know the cash allowance is taxable, do I also pay NI on the amount?

Many thanks

jimmo

1. No, not for the first year of making a claim. After that first claim you will then be able to have coding allowances for the future. For the first year you should get a repayment. For non SA cases:
https://www.gov.uk/hmrc-internal-manuals/paye-manual/paye91037
For SA cases you will be able to submit your bank account details in your Return.
2. Yes. Whilst it may be called a car allowance, for tax and NI purposes its just pay.

dori2o

Have you taken into account insurance costs, servicing, depreciation, cost of buying/hiring a car in your calculations? These are things people often overlook when considering company car tax.

Would it not be possible to exchange your current car for a hybrid/alternative fuel car, or one with much lower CO2 rating and list pri e?

singhini

OP - do you know if there are any restrictions with your companies op-out scheme? (when I opted out my employer restricted the age of my vehicle i.e. my car could not be over 6 years old. Also I was required to send evidence to my employer annually that I had appropriate insurance which covered business use. I also had to demonstrate I had breakdown cover).


In terms of costs associated with running your own car, I recall spending money on RFL, Business use insurance, Fuel, MOT, Servicing, tyres, monthly HP charge, aswell as factoring in depreciation and costs associated with minor repairs and service items i.e. screen wash, engine oil, coolant etc....


With regards to tax relief on business mileage, your correct, you get the relief on the difference between what your employer gives you and the HMRC rate of 45p & 25p (in your case on the first 10,000 miles it will be 45p - 13p = 32p x 40% = 12.8p per mile and on mileage above 10,000 it will be 25p - 13p = 12p x 40% = 4.8p per mile).

ChuckMountain

As a quick sanity check for £5k claiming in relief would be 25k miles a year and give you back £2k in tax rebate. Assuming you paid 40% tax on at least £5k of your income.

Bumping up mileage to 25k on car schemes such as PCP will bump up the price somewhat so make sure you factored it in. Otherwise excess mileage would need to be factored in.

Also either put in minimal deposit into car scheme and/or make sure you saving the deposit for the next car as it all adds to the real monthly cost.

Pauli354

Thanks all and some valid points. Yes, I have looked at all the angles and options before getting to where I am now. Essentially, this is how the sums add up.

I pay £330 co car tax, and a £190 upgrade for my co car. Thats £520 deducted from my wages each month. As soon as the car goes back, thats £520 the other way into my bank.
So I have to then arrange my own car for business use. The company will pay me £350 pm towards my car. Approx £200 net. In addition, I can claim £2000 annual tax relief on 25k business miles. So thats a further £166 into my salary each month. Adding all up, the swing is therefore £886 before I go out and get a car.

I have priced 2 vehicles on a 4 year lease inc breakdown cover and road tax and warranty. They range from £285 per month to £400 per month. My insurance inc business use will be approx £50 per month. 6 yrs no claims, long time driver. So between £335 and £450 on the road. I only have to cover servicing and tyres/ pads etc when needed. I will have saved £436 to £551 per month with the above calculations. Thats almost £6k to £6.5k per annum saving. I will still be hugely better off after tyres etc.

BoGoF

How much a month/year will you be spending on fuel - I dont see that factored in to your calcs?

You may be underestimating the running costs on a vehicle that does 25k miles (plus personal miles?) a year.

Is there no option to take a less expensive company car?

ChuckMountain

Yes agree with BoGoF, where are the fuel costs in this?

Do you not have a fuel card to cover those and pay for the 25k of business miles currently?

With a car allowance you pay for all the fuel yourself and recover it from the mileage rate they pay.

Are you going for a Jaguar XF or a different car, if the latter it may well be cheaper but then you are not comparing apples and apples so its a bit of an unfair comparison.

A quick Google and an XF 2.0 TDI Auto comes in at around £500 + 3 to 6 months initial payment. So that is an extra £30 to 60 month to factor for the deposit. You may well be able to get a good deal but I doubt £285 unless you have high deposit and then unless you include that in the monthly costs is skewing the calculation.

If you do 25k miles and you get 50mpg average you will be spending around £2,800 in fuel. At 40mpg you are going to spending £3,500 in fuel.

That's nearly £300 a month in fuel or put it this way 14pence a mile in fuel which is more than you are getting back from the company excluding relief.

What have you factored in for servicing as a main dealer is going to be at least £200 a service if not more with the mileage its likely to be 1.5 services a year over 4 years.

If you take your top figures even including the relief, they still look wrong

886-450=436 a month saving or £5232 a year

Add in £3,500 of fuel £500 of servicing, £400 of tyres a year and you are only just better off.

That is if you can get the same car that only costs 450 with deposit factored monthly

My calculations have you worse off.

Pauli354

BoGof The fuel cost is not a factor in this calculation because I will be paid the same way I have always been paid. I claim my business mileage each month in arrears at .13ppm, that will remain the same. My fuel will not cost any more than now. I still get the same business mileage payment of .13ppm each month as I do now after I opt out, and I will be doing the same private miles which I do now after I opt out, and that is negligible. The cars I am looking at are more fuel efficient and the .13 ppm is actually more than the cost of the fuel per mile and therefore will actual fund some of the private mileage so I will be marginally better off from a fuel standpoint than I am now. In any event, the cost or benefit of the fuel is not a factor in my equation.

For the record. My current mpg is 44mpg. That costs me £5.41 at the pump. For driving 44 miles on business my company pays £5.72 (.31p more than cost.) this effectively contributes almost £15 a month or approx 122 free miles to my small actual private mileage cost.

The deposit factored over 48 months is less than £25pm.
Again, for the reasons mentioned, the fuel is not a factor as I will get my business mileage the same way I do now, and pay any private mileage the way I do now.
Where on earth did you get £500 a year servicing and £3,500 fuel, and £400 for tyres?
My quotes for leasing include maintenance. No further costs after that.
My co car on average got 1 service per year, and a set of tyres. If I needed to I would be paying £300 max for tyres, and £200 for servicing, but the maintenance contract covers that.
So based on higher lease quote at £450 inc maintenance and insurance thats £886 -£450 = £436 saving pm or £5232 pa. Of course when all is done, it may be £50 or £80 out depending on the final cost of everything, but its still a significant saving. I think thats more than enough of an incentive to change.

BoGoF

Apologies - I assumed you had fuel benefit with your company car.

Pauli354

No problem. I have fuel benefit in as much as my business mileage is paid for by the company, and it will be the same after I leave the scheme.