New job and car /fuel allowance

vectradam

Hi
first time on here so thanks for any help.
I have been lucky enough to get a new job after being made redundant earlier this year.
I have been offered a car or car allowance (£3400) per year and have decided to take the car allowance as i already have suitable car which i am happy to use. My confusion arises when it comes to the fuel i will use. I have the option of a fuel card but i understand that if I don't take this i can claim for the mileage I do, 45p for 1st 10000 miles and then 25p for any miles above 10000. My new company will reimburse at 10p per mile apparently so I think I would be slightly down but i understand i can then claim back from HMRC at the 45p and 25p rates if i fill in a tax return.
Am i correct in what i say ( and is my new company getting off cheaply by only reimbursing 10p).
This seems like a good deal if you can wait a long time to get your money back.
Can anyone help me please ?

Kind regards
John

MX5huggy

If you do 10000 company miles per year then it’s about even with the 45p per mile you should get. Do 100k then the company are winning. 

You don’t get 45p from the HMRC you get tax relief on 45p per mile. So about 9p per mile up to 10000 if you pay 20% tax. You’ll loose 10p of the 45p because they are paying you 10p per mile so you’ll  get 7p “back” from the HMRC. 

Were_Doomed

How does the fuel card work with your company? With mine they pay for the fuel and then charge me 8p per private mile. Given that fuel actual cost (vs my MPG) works out at between 11p and 12p per mile then it works out to my benefit.

Grumpy_chap

Car allowance plus fuel card can work out very good from a tax perspective:

Option 1 - car allowance plus fuel card

1. Car allowance subject to tax and NI
2. Fuel card subject to BIK at the rate of whatever cost of fuel you put in (tax rates linked to the vehicle not applicable when it is the employee's own car)
3. Record your business mileage and claim back the AMAP relief in your tax return.  Not the full 45p / 25p is claimed, only the tax that would be paid on that rate (20% / 40%).

Option 2- car allowance plus reclaim mileage

1. Car allowance subject to tax and NI
2. Claim business mileage at AMAP rate (about 10 pence / mile) - no tax or NI on this
3. Record your business mileage and claim back the difference between AMAP fuel relief and full AMAP mileage in your tax return.  Not the full 45p / 25p is claimed, only the tax that would be paid on that rate (20% / 40%).
   

RedMonty

I'm no expert here, so take everything I say with a grain of salt. I'm sure others will correct me. 

Query: Are you in employment i.e. on their payroll, or are you self-employed and paid as a contractor? The rules are very different in each case. 

1. If you are in employment, all your tax is taken off through their payroll before you receive your money.  I believe you don't have anything you can claim '45p per mile' back from.  The company has given you a big wodge of money, plus will give you a further 10p per mile mileage.  Your life is simple. Do your job and enjoy your free time outside work. (but keep an eagle eye on your monthly payslips and check them every month. Ask your manager or your colleagues about anything you don't understand, or look it up online).

 2. If you are self-employed and paid as a contractor, then you are responsible for your own taxes and for filling out your tax return properly. This is where you would take off 45p per mile.  This is extra (unpaid) work for you, and is especially stressful when tax returns become due each year.   
Example:  The company pays you £10,000 all in all (including the car allowance and I think, that 10p per mile). That's your earnings. Then when you do your tax return, you deduct from your earnings 45p per mile as expenses. So if you did 10,000 miles FOR WORK (keep records, HMRC may want proof that this was for work, and excluded any personal trips), 10,000 x 0.45p = £4,500.  £10,000 deduct £4,500 leaves £5,500.  So you only pay taxes on that £5,500.   Other permutations are possible as other posters have laid out above. 
(actually you only pay taxes on the part of your earnings that goes over your tax free allowance which is £12,500 in 2020/21) 

Grumpy_chap

The OP is clear they have a new job PAYE employee.
The following is incorrect:

RedMonty said:

1. If you are in employment, all your tax is taken off through their payroll before you receive your money.  I believe you don't have anything you can claim '45p per mile' back from.  The company has given you a big wodge of money, plus will give you a further 10p per mile mileage.  Your life is simple. Do your job and enjoy your free time outside work. (but keep an eagle eye on your monthly payslips and check them every month. Ask your manager or your colleagues about anything you don't understand, or look it up online).

The OP will pay tax and NI on their salary plus the car allowance.
The OP will receive business mileage at 10 pence / mile
The OP is entitled to claim tax relief on the difference between the business mileage rate reimbursed and the AMAP rates, of 45 pence / mile for first 10k miles and 25 pence / mile thereafter.  This is nett 35 or 15 pence per mile and the OP will only receive a reduction in tax paid, depending upon marginal rate.  At basic rate, that means 7 pence / mile or 3 pence / mile >10k miles.  At higher rate, the gain increases so 14 pence / mile or 6 pence / mile >10k miles.

Different if the OP choses the fuel card.

I do not advise asking the manager or colleagues if there is anything the OP does not understand.  Many employers frown on talking about this type of subject between employees and there is no reason they will know any more than the OP in any case.

vectradam

Hi
thanks for information.
I am somewhat clearer now but the fuel card that is also available is now appealing although i am unsure at what rate i would have to pay for private mileage.
Assuming the private mileage rate is reasonable at say 10p per mile what would  people do. The fuel card does seem like a lot less hassle but if there is a decent financial gain by buying fuel myself and reclaiming i would do it.
Can i still claim back from HMRC if i use their fuel card ?
Could anyone give me an illustration of each methos based on 30000 business miles a year at 40mpg please ?

many thanks again

Were_Doomed

At my company we use The Mileage Company (TMC) to record mileage each month. (I have the app on my phone). Every business trip you record the start/destination/mileage/trip reason, and at the end of the month you record the closing odometer reading. Then personal miles are calculated, charged at 8p per mile and the amount is deducted from salary. I also record fuel usage (fill to fill) to calculate MPG ... based on this I know the actual cost would be between 11p and 12p per mile, so having the fuel card is a cost saving for me. (Previously I would expense business miles at 11p per mile whilst paying for fuel myself).

Grumpy_chap

vectradam said:

I am somewhat clearer now but the fuel card that is also available is now appealing although i am unsure at what rate i would have to pay for private mileage.
Assuming the private mileage rate is reasonable at say 10p per mile what would  people do. The fuel card does seem like a lot less hassle but if there is a decent financial gain by buying fuel myself and reclaiming i would do it.
Can i still claim back from HMRC if i use their fuel card ?
Could anyone give me an illustration of each methos based on 30000 business miles a year at 40mpg please ?

I set out some examples in a similar thread recently:
https://forums.moneysavingexpert.com/discussion/comment/77752225#Comment_77752225

If you can narrow down the variables, it is easy to run similar examples for your case.

If you can get it, the most attractive option is car allowance plus fuel card and paying the BIK on the fuel card.  
If there is car allowance plus fuel card, but you repay the private fuel, then the BIK is zero, but this is less attractive in terms of money in your pocket.
I previously had car allowance plus fuel card, did not repay private mileage but did claim the AMAP rates for business mileage in my tax return.  It worked out very favourable.

NottinghamKnight

Were_Doomed said:

At my company we use The Mileage Company (TMC) to record mileage each month. (I have the app on my phone). Every business trip you record the start/destination/mileage/trip reason, and at the end of the month you record the closing odometer reading. Then personal miles are calculated, charged at 8p per mile and the amount is deducted from salary. I also record fuel usage (fill to fill) to calculate MPG ... based on this I know the actual cost would be between 11p and 12p per mile, so having the fuel card is a cost saving for me. (Previously I would expense business miles at 11p per mile whilst paying for fuel myself).

My last company used TMC but all mileage was calculated on a pro rate basis so there was no benefit using the card apart from a minor cashflow one, as if I used half monthly mileage on personal miles then I was charged half the full that went in, updated every month.

Were_Doomed

NottinghamKnight said:

Were_Doomed said:

At my company we use The Mileage Company (TMC) to record mileage each month. (I have the app on my phone). Every business trip you record the start/destination/mileage/trip reason, and at the end of the month you record the closing odometer reading. Then personal miles are calculated, charged at 8p per mile and the amount is deducted from salary. I also record fuel usage (fill to fill) to calculate MPG ... based on this I know the actual cost would be between 11p and 12p per mile, so having the fuel card is a cost saving for me. (Previously I would expense business miles at 11p per mile whilst paying for fuel myself).

My last company used TMC but all mileage was calculated on a pro rate basis so there was no benefit using the card apart from a minor cashflow one, as if I used half monthly mileage on personal miles then I was charged half the full that went in, updated every month.

If I do 550 miles in a month, and they're all personal (commuting doesn't count as business miles) then that's basically a tank of fuel ... let's say 50 litres. Diesel round here is ~ £1.14 per litre so that's a spend of £57.00. As I am charged personal miles at 8p per mile then I would be charged £44.00 ... so a net "profit" to me of £13. (The arrangement my company has means I pay no BIK for the fuel card as I'm not officially gaining a benefit by having it, despite the reality being different).