Mileage Rate - Confused on rates - wonder if you can help please? 18 March at 8:11AM in Motoring 3 replies 164 views

mike83_2

Hi all.
I have 2 questions, really could do with help, Google has confused me .

Scenario Based on 10k Miles per year (for simplicity) !


Question 1. Situation is, I use my own car for business travel (and pocket a car allowance, taxed in PAYE). I can claim 45p a mile for 10,000 miles.     Am I correct in that I can claim 45p * 10,000miles (£4500) off my overall tax bill?   Or is it that I do not pay tax on £4500 (e.g. a 40% tax payer would normally pay £1800 tax on £4,500).

I know the rates cover actual fuel cost (about 17p a mile for me), depreciation, tyres etc - but for simplicity, I am trying to work out if I get £4500 in my back pocket, or is it the £1800 tax saving?


Question 2. I am thinking of taking out a EV, though company scheme (Tusker(s)) - I am very confused if this would constitute a "Company Car" or privately owned vehicle (as I am essentially opting to take out a lease from salary sacrifice).    There is a huge difference in mileage rate.    Privately owned is eligible for 45p, but company owned is much less (like 8p or something).    

If this was eligible for the 45p, it gives me a strong business case to get an EV (Depending on answer to question 1 & 2 )  

Really appreciate any help on this confusing topic - I am trying to minimise my motoring cost.

Grumpy_chap

1.  Own car - you can get the tax relief on the mileage claim, not the full amount.

2. EV via SS is then a company car.  You will be liable for BIK (2% I think) but save income tax and NI on the amount sacrificed.  AMAP rate will then apply - this only covers the fuel / energy cost.  I have not checked rate recently, but the 8 pence per mile you mention sounds about right.  Tax relief on that amount, not the full rate from HMRC.

Bluebell1000

We have a salary sacrifice car through tuskers. The EV rate just went up to 9p per mile. 

I like the convenience of knowing it's a single monthly payment and nothing extra except the occasional screenwash. It includes all the maintenance, tyres, etc, and we got a free home charger though I don't know if they are still offering that. I think it is a bit more expensive than running an older second hand privately owned car, but in a couple of years it'll probably be saving me at the 40% tax rate instead of 20...

Bigphil1474

OP, they basically tax you on any profit related to car expenses. You need to calculate your total mileage, then you are allowed up to 45p per mile before you get taxed on it. You do need to add the allowance and mileage rate together though, so if you get 45p a mile plus, for example, it works out about 10p per mile from your allowance (depending how many miles you do), then 10p per mile will be 'profit' so will be taxed as such. The tax is normally by way of a reduction in your tax free allowance the following year, i.e. your tax code will change. 

With salary sacrifice schemes, you need to factor in the loss of any allowance and reduced mileage. However, if you did your own private lease scheme outside of the work scheme, then you may still be entitled to claim the 45p a mile as it would be a private vehicle still - it's just a matter of doing all the maths and working out which is most beneficial to you.

I did some calcs for me, and the lease scheme on an example Renault Zoe through work (NHS Fleet) would have been about £70 a month cheaper than doing it privately, but I would have lost £85 a month allowance, and about 30p a mile mileage. The private lease would have been without insurance but I only pay £20 a month insurance so would have been way out of pocket doing the salary sacrifice. Haven't done either yet as I have no off street parking atm. Also, don't forget if you have a works contributed pension - anything taken from your gross salary for the sacrifice will also mean reduced pension contributions from them. My employer pays 14% so I'd have lost about £50 a month going into my pension from work as well as my contributions going down a bit as well. 

Good luck working it out cos it's a blinking minefield.