Mileage Allowance, self employed

Grumpy_chap

In this case, the OP has done about 3,900 miles which could be claimed as a business expense at the rate of £0.45 per mile, resulting in the costs to the business of £1,755.
The tax benefit for a sole trader at higher rate tax would be £702.
The tax benefit for a sole trader at basic rate tax would be £351.
The tax benefit for a sole trader below the personal allowance would be £NIL.

It may be worth the OP's sister doing some research so they have a better understanding next year, on all the tax matters.  I wonder whether there is a friend they could speak with that has Accountancy experience and would talk them through things for the price of a drink down the local?  I suggest that because, for a business where profits are low (below the personal allowance), engaging the services of an Accountant on a paid basis is possibly not going to yield a financial return.

Petriix

There are other potential benefits relating to claiming expenses, even when earning below the tax threshold. Someone earning a low income might well be in receipt of universal credit or tax credits, in which case recording and reporting all legitimate expenses means lower deductions.

Car_54

If/when the OP's sister earns enough to pay tax, she should think carefully before claiming on the per-mile basis. The alternative is to claim the actual costs (adjusted for non-business use), which, although more complex, may be beneficial.

Grumpy_chap

[Deleted User] said:

If/when the OP's sister earns enough to pay tax, she should think carefully before claiming on the per-mile basis. The alternative is to claim the actual costs (adjusted for non-business use), which, although more complex, may be beneficial.

AIUI, it is not permitted to change from "per mile" to "actual cost" for the same vehicle.  Once a vehicle is elected to the "per mile" allowance, that vehicle has to stay that way forever.  The decision to elect to "actual cost" can only then be from whenever the individual acquires a different vehicle.  It is logical that it is that way, otherwise the preferred approach would flipflop through the vehicle life.

Car_54

Grumpy_chap said:

[Deleted User] said:

If/when the OP's sister earns enough to pay tax, she should think carefully before claiming on the per-mile basis. The alternative is to claim the actual costs (adjusted for non-business use), which, although more complex, may be beneficial.

AIUI, it is not permitted to change from "per mile" to "actual cost" for the same vehicle.  Once a vehicle is elected to the "per mile" allowance, that vehicle has to stay that way forever.  The decision to elect to "actual cost" can only then be from whenever the individual acquires a different vehicle.  It is logical that it is that way, otherwise the preferred approach would flipflop through the vehicle life.

That's right, and why I advise thinking carefully!

Grumpy_chap

[Deleted User] said:

That's right, and why I advise thinking carefully!

However, it would seem as though the election to use "per mile" allowance has already been taken in the case of the current vehicle.  It is irrelevant that the claim resulted in no difference to the individual's tax liability for the year, the method has already been chosen.  As I read the thread, the OP's sister has claimed the "per mile" allowance (amounting to £1,755) and declared that in the tax return for 2021-22 (submitted by 31/01/2023) and was expecting *someone* to send a cheque for the sum claimed - quite possibly that the OP was the *someone*.  If that is the case, the OP's sister cannot elect a different accounting method until such time as the vehicle is changed.

Grey_Critic

Think we are short of information here. The OPs sister works as a delivery driver using her own vehicle - I would assume she is paid a rate per hour - is that supposed to include a mileage allowance or does she submit a claim with the employer?

Her rate of pay should be at least minimum rate *PLUS* 45 pence per mile. - the allowance includes not only the cost of fuel and maintenance but the additional insurance costs. If she is only getting minimum wage and the mileage allowance is included in that then she is being underpaid.

sheramber

ontheroad1970 said:

Tell her to make sure that she is properly insured for business driving.  Would be a very expensive error not to.

She needs insurance for HIre and Reward.

sheramber

I donlt think self employed drivers come under minimum wage.

Just Eat , Deliveroo pay by deivery.  Payment depends on how long the dleivery is scheduled to take but no expenses.

Evri , Yodel drivers get paid per parcel delivered but pay for their own fuel and running costs. Yodel do give an allowance towards mobile phone costs.

Grumpy_chap

sheramber said:

I donlt think self employed drivers come under minimum wage.

It is quite a complex area with many different approaches - we have no information on how the OP's sister works and the extent to which she is self-employed or not.

In some cases, you don't need business insurance.  My Nephew did Amazon deliveries using his own car and Amazon offered a rate where he had to get business insurance and a different rate where Amazon covered the insurance under a group arrangement.  My Nephew took the latter.