Car allowance and mileage rates

timsmith

Hi,

Im not very clued up on this subject, so Id be grateful for any info.

I currently get a car allowance from work and a mileage rate of 18p per mile for business miles. I doubt that I will exceed the 10,000 business miles per year.

After the end of the last tax year, I submitted a form to the IR with details of what miles Id done and what rates I got.

I understood that I would receive tax relief on the difference between the aloownace and the AMR - ie in my case 22p / mile. So tax relief would be 40% x 22p per mile - is this correct?

Havign discussed with our HR department about raising the allownace, they have replied "well you can claim the other 22p from the IR anyway". As menioned above, I believed that the benefit given by the IR would be40% of the other 22p not the full 22p.

Can anyone please advise what form I should be using to claim this and exactly what benefit I would get?

Many thanks

Tim

fengirl_2

Need clarification - you get a car allwoance in additon to the 18p per mile - how much is this and is it taxed along with your salary?
You are right, tax relief is at your highest rate, not in terms of cash paid out.

timsmith

Hi,

Yes - I get £500 per month which is just treated as part of my salary. The 18p per mile is additional based on business miles I do.

Thanks

Tim

Hoddie_2

You're correct, you can only claim tax relief on the difference between what your employer pays and the approved mileage rates. A lot of employers try and say "we only pay 10p but don't worry you can claim the rest from HMRC." Most are deliberately trying to pull a fast one, but some genuinely believe that to be correct. If that was the case, why would any employer pay anything? Your car allowance is just extra salary and won't come into the equation (unless they're paying it gross).

timsmith

Thanks for that.

can anyone suggest what arguments that can be used against a company that continues to pay on 18p per mile (despite petrol price rises) using the argument (incorrectly) that the full 22p difference between 18p and 40p cna be claimed back from the Inland Revenue.

Im currently trying the fact that it nearly costs me money to travel at 18p per mile and I wouldnt be able to claim from the IR until end of tax year. Additionally, since rebate usually appears as change to tax code, it could be up to 2yrs before I actually received the rebate in reality.

thanks

tim

MickKnipfler

You'll probably find that the company's view is that you have the option of having a company car and choose to take the cash instead. If you were using a company car, the rate is more likely to be 10-14p or something.

I used to only get 12p when I was in the same boat so 18p would seem quite generous.

lisyloo

can anyone suggest what arguments that can be used against a company that continues to pay on 18p per mile

Hi tim,

I get 40p per mile for using my OWN car (no car allowance).
Because it my own personal car this is meant to cover costs like additional depreciation, wear and tear, business insurance etc.

However your car has already been partly paid for by way of your car allowance, therefore some of these items have already been covered.
Obviously you need to be recompensed for petrol.

I don't know the full details of the amount of your car allowance and what mileage your expected to do, but on the face of it, it doesn't seem too unfair to me.

Sorry, its just my honest opinion on the situation that some of your costs are already covered by the car allowance.

maz29

Hi

Please could someone help me.

I have started a new job and I have been offered a car allowance of £4560 per year, which is fine.
What I am confused with what business mileage rate I can claim.

We have to pay for our business fuel and the company then reimburse us using the following calculation:-

Say I did 10,000 business miles divide by mpg (50 mpg) = 200 gallons

200 gallons multiply by the current price of petrol (e.g £5 per gallon of petrol approx) = £1,000 paid to me for business miles used

I don’t think this is right. (where do they get the above calculation from?

I was under the impression that because I was using my own car (and receiving a car allowance) I could claim 40 pence per mile for the first 10,000 miles and then 25p per mile for over 10,000 miles tax-free.

Please can someone clarify what I can claim when using my own car and receiving a car allowance.


Also please could someone also clarify the difference between (company car -advisory fuel rates- which are currently 12p for a car with an engine less than 1400cc/petrol) and (approved mileage rates, which are 40 pence per mile for the first 10,000 and then 25p for the remainder). Im confussed as to the difference and if both can rates can be used for private cars and company cars.


Much appreciated if someone could help


Kind Regards

Maz

fluffy_bunny_4

Hi there,
As a newby to all things inter-web-netting, I hope I'm doing this correctly.

Can anyone offer advice please? I will shortly be statring a new job, and have the option of a company car or a car allowance. I've never had either of these before, so I want to make sure I end up with the best deal both in terms of money in my pocket / value and paying as little tax as humanly possible.

I currently have my own vehicle, and am paying amonthly amount on finance. Fortunately, I am not in negative equity on the car should I need to sell it. The car allowance I am presuming is to pay for the servicing, MoT, repairs etc etc. This will be iro £4500 per annum. If I opt for the company car, I will have no bills to pay other than to put fuel in the thing, and I can claim for any additional business mileage over that of daily commuting.

Is it financially better to go for the allowance or is it better to get the car? I understand that I will be heavily taxed for the use of a company car, mind you, I will also for the car allowance. How does this work with my current car insurance as I am mid way through the policy (I know about cancelling and being charged short period rates)? How does it work with my No Claims Discount etc? Does this just go on hold whilst I drive the company car?

Eeekk! It's all very confusing and I don't want to make the wrong decision.

Thanks for your help!!!

daveuk77

Hi, i'm just setting up a limited company VAT registered. I will be a director of the company, so classed as an employee.
I would like to know the best options for paying a salary and running a car without by paying the least tax personally and least cost for my company.

1. I have been told that i can pay myself a salary of £6750 per year tax fee and claim back a dividen from the taxable company profits up to £40,000 per year and only pay 10% tax on the dividends. Is this still correct or has it changed for the tax year 2010-2011?
2. Is there any other options?

I also need to run a company vehicle. Which option would be best for me?
The contract hire vehicle has a cost of £362+VAT per month and i will do around 12,000 business miles and 3,000 private miles per year.
1. Should i lease the car privately at a cost of £426 inc VAT + £1000 insurance and claim back business miles at 40 p / mile - up to 10k and 25p / mile over 10k - £4500 / year.A personal cost to me of £1612 / year
2. Should i lease the car and insure it claiming the VAT back off the lease and the fuel, and paying for the insurance and pay tax on my wages as a benifit in kind of £5295 for the car (£1059 / year) and pay for my private fuel.
3. Should i lease the car and insure it claiming the VAT back off the lease and the fuel, and pay tax on my wages as a benifit in kind of £5295 for the car (£1059 / year) and pay for benifit in kind on my fuel £3420 (£684 / year) and not pay for any private milage?
3. Are there any other better options?

Sorry for all of the questions but i would really appreciate some advice?

Dave

keith1950

Hi daveuk77, I used run run a limited company and you should set your 'wage' at or around minimum wage but high enough to just pay national insurance so you are contributing towards your eligibility for your old age ' state ' pension. As far as dividends are concerned after an initial allowance (which used to be £10,000) then they are taxed via corporation tax which I believe in the current year is 21% for small businesses. No doubt someone will come along and give you more up to date information soon.