Mileage Rate or Advisory Fuel Rate When have Car Allowance

Lisa1978

Our company pay (depending on fuel/engine size) around 16p a mile to those with a company car allowance and 45p to those who don't receive a car allowance. 
Is this correct or should the 16p also be 45p? I was thinking the 16p was correct when we previously had company cars rather than allowances. 

Thanks. 

whizzywoo

Lisa1978 said:

Our company pay (depending on fuel/engine size) around 16p a mile to those with a company car allowance and 45p to those who don't receive a car allowance. 
Is this correct or should the 16p also be 45p? I was thinking the 16p was correct when we previously had company cars rather than allowances. 

Thanks. 

You have posted on the wrong Board.  This is for Welfare Benefits.  Try posting your question on the Cutting Tax Board here:
https://forums.moneysavingexpert.com/post/discussion/cutting-tax

TELLIT01

Whether somebody takes a car or the allowance, the rules are the same.  Probably more concerning is that the rates haven't changed in the past 20 years.

Lisa1978

TELLIT01 said:

Whether somebody takes a car or the allowance, the rules are the same.  Probably more concerning is that the rates haven't changed in the past 20 years.

Thank you, so the company are using the correct rates? Thanks for the clarification. 

jefaz07

The rates we use are set by HMRC
I receive 13p per mile currently. I submit a tax return claiming the relief up to 45p for the first 10,000 miles then relief up to 25p for the remainder. 

We also get an annual payment paid monthly to buy a car. 

Grumpy_chap

Lisa1978 said:

Our company pay (depending on fuel/engine size) around 16p a mile to those with a company car allowance and 45p to those who don't receive a car allowance. 
Is this correct or should the 16p also be 45p? I was thinking the 16p was correct when we previously had company cars rather than allowances. 

Thanks. 

There are two different things here that may be partially conflated.

First, the cost to the company, who would aim for a broadly cost-neutral position between the company car or car allowance.  
If the company gives you a car, then the mileage is fuel only at 16 pence.
If the company gives you a car allowance instead of the car, the cost-neutral objective also requires that mileage is paid at 16 pence.

However, from a tax perspective, you now have the car allowance which is subject to NI and income tax.
Then you are paid 16 pence per mile for business mileage, which is lower than the permitted AMAP rate.
You can claim tax relief on the difference between 16 pence and 45 pence for the first 10k miles.  29 pence per mile tax relief is worth 5.8 pence per mile for a basic rate tax payer.
Over 10k miles, the tax relief reduces to the difference between 16 pence and 25 pence.  9 pence per mile tax relief is worth 1.8 pence per mile for a basic rate tax payer.