Mileage allowance still £0.45 P/M. Why?????

foxy-stoat

Hear what your saying but the guy runs his own company so there will be tweaks he can do, also he may well be paying over £5000 in running costs but he has to pay income tax before he spends it so gross its closer to £9K assuming he is on 40%

AdrianC

foxy-stoat wrote: »

Hear what your saying but the guy runs his own company so there will be tweaks he can do, also he may well be paying over £5000 in running costs but he has to pay income tax before he spends it so gross its closer to £9K assuming he is on 40%

He's not paying income tax on the 45p/mile for the business mileage, which is covering virtually all of the car's cost now.

He'd still be spending money on the fuel for the private mileage, because there's no way that BiK on private fuel on that barge would be worthwhile for 1,600 personal miles/year.

bob_a_builder

And as I recall the threshold for paying tax on a company car is stated on various forms was "...company directors and others earning over 8000 per year..."

The two were probably synonymous as some point in time

foxy-stoat

AdrianC wrote: »

He's not paying income tax on the 45p/mile for the business mileage, which is covering virtually all of the car's cost now.

He'd still be spending money on the fuel for the private mileage, because there's no way that BiK on private fuel on that barge would be worthwhile for 1,600 personal miles/year.

Didnt mean that, when I pay for my insurance, ved, fuel, mot and servicing I have already paid 40% on the income - nothing to do with paying tax on 45p a mile for fuel.

almillar

As you can see, quite expensive per year & I know some of you will say "change your vehicle"

That's exactly what HMRC want to encourage you to do. As above, there used to be different rates for different engine sizes, but this could have been seen as rewarding gas guzzlers. To 'reward' smaller car drivers, it went to a single rate. And has not fluctuated along with big spikes in fuel prices.
Your employer can pay you more per mile if they like, but you'll be taxed on the extra.

Got the message? If you think you're being ripped off, buy a cheaper to run car. This is by design!

AdrianC

foxy-stoat wrote: »

Didnt mean that, when I pay for my insurance, ved, fuel, mot and servicing I have already paid 40% on the income - nothing to do with paying tax on 45p a mile for fuel.

Yes, you have. But they are being factored in to your 49.4p/mile cost... Of which you're getting 45p/mile back tax-free.

System

grillphil wrote: »

So why hasn't this been reviewed again for years, that's my point.


Everything has gone up with inflation but this seems to be left in the dark by the government. Crafty I think!

Cars have become far more economical. Mid 30 MPGs was the average for a small car, now you're looking high 40 to 70 MPG. They're also a lot more reliable than they used to be as well so on a per mile basis the running costs are probably not that much different.

Ultimately its still 45p per mile because unless you're running a gas guzzler 45p per mile is still higher than what it actually costs you and the allowance is to reimburse you for the cost, not give you free money.

Bigphil1474

Tarambor, I work for local government and we get 40.9p a mile and £963 a year lump sum. I do about 2,500 miles a year so get roughly 79p a mile. The rates are based on a presumed 8,500 miles a year using a car with engine size 1000-1199cc, so would equate to 52.2p a mile if you did that mileage - more miles, less per mile. The rates we get paid are based on a line by line analysis of the cost, using 2010 figures, of providing your own car for work. They haven't reviewed it in 8 years. Inland Revenue have only changed the tax free rate once in the 25 years I've used my car for work, 40p to 45p. The IR aren't in the business of reflecting cost, they reflect tax collection.
It costs far more than 45p a mile to provide your own car for work if you do a lot of mileage - 10k+. The allowance should cover the cost of your work miles, not just a bit of petrol and the occasional tyre change - think depreciation due to extra mileage, cost of maintenance and repair, business cover on insurance plus pro rata insurance for work use, tyre wear, increased general wear and tear, pro rata cost of buying car, and the general extra costs associated with doing more miles. IR should be reviewing the rate on a regular basis, not once every 15 years or so.

AdrianC

Hold on, Phil...

It should cover the MARGINAL cost of using your car for those business miles.

Basically, if you look at the cost of owning the car for your personal use, that's your own problem. Agreed?

So in the OP's case, he should be paying the equivalent of providing that car for 1,650 miles/year out of his own pocket. Then the difference in cost from his 9,900 business miles. Fuel, obviously, for that mileage. Extra maintenance cost. Business insurance difference. He's paying the VED anyway. He's paying the MOT anyway.

On that basis, at 45p/mile, the OP is quids in - the cost of his personal mileage and base ownership is about -£500/year, based on the rough numbers I worked in post 15.

DoaM

foxy-stoat wrote: »

If you own the limited company then pay yourself a car allowance of £5000 or get your company to pay for the servicing

Wouldn't that be classed as gaining a Benefit In Kind (BIK) and so be taxable? Would that then mean the mileage would be 11p rather than 45p?

Company car drivers (i.e. those given a lease car) pay tax on the BIK based on the list price of the vehicle. They then also get a reduced mileage rate.

I don't know if a car allowance means the vehicle is still classed as a private vehicle made available for business use (so attracting the higher rate) ... if it is then the allowance will be classed as income and will be taxed at your marginal rate (probably 40%, so £5k allowance will be £3k in income).