Essential vs Casual car user? Which is best?

Dentoned

As title suggests *edited*

Grumpy_chap

Dentoned said:

  I am paid £0.55 per mile

At that rate, be sure to set some aside for the tax liability that will arise.  It exceeds the maximum that is tax exempt.

sheramber

What your employer is paying you is above theHMRC approved amount so you will need to pay tax on the difference.

https://www.gov.uk/expenses-and-benefits-business-travel-mileage/rules-for-tax

If your employer gives you a lump sum then that will be added to your earnings and taxed accordingly.

jimmo

Essential user and casual user are local government terms which have no bearing on Income Tax.

In effect all HMRC will need to know will be how much your employer paid you for using your own car, if any tax was deducted from the payments and how much tax relief you wish to claim using HMRC rates, currently 45ppm for the first 10,000 miles and 25ppm after that.

The HMRC manual has some background information and the following link is to the first page of that. However you really need to understand your own Council's policy before you can make any decisions.

EIM65815 - Tax treatment of local authority officials and employees: payments for using own car for work: general - HMRC internal manual - GOV.UK (www.gov.uk)

TheBanker

jimmo said:

Essential user and casual user are local government terms which have no bearing on Income Tax.

My employer uses those terms, and we're a private company. 

Essential Users get a monthly cash payment (which is taxed) and are allowed to claim 15p per mile. They are required to have a car available, and if they don't they have to fund the cost of the travel (over and above the 15p per mile) themselves. The only exception is where it is preferable to use a train, e.g. if travelling into central London or if it will be a long day and driving would be unsafe due to fatigue. 

Casual Users are entitled to ask for a company vehicle if they need to travel. If they use their own car they can claim 45p per mile.

I am an Essential User and it works out far better - I get the monthly cash sum, and I can claim higher rate tax relief on my mileage. And since Covid I've only done about 100 business miles. There was talk of consolidating the cash payment into salaries but the company decided not to, because it would then become part of pension contributions, and subject to the annual pay rise. As it is, the amount hasn't changed for about 8 years, but the company cannot simply remove it as it is a contractual entitlement. 

Grumpy_chap

TheBanker said:

jimmo said:

Essential user and casual user are local government terms which have no bearing on Income Tax.

My employer uses those terms, and we're a private company. 

Yes, different organisations can use the terms, but they have no standard definitions and no direct meaning in terms of tax - HMRC are only worried what payments are made to the employees rather than what these payments may be called by the organisation.

Grumpy_chap

Maximum tax free mileage rate is 45 pence per mile for first 10k miles per year and then 25 pence per mile after that.  Year is April to March.