clarification car allowance

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Discussion

sdyson31

Original Poster:

156 posts

124 months

Saturday 23rd April 2016
quotequote all
Hi,

Just want to get some clarification on car allowance. Company is offering £400 a month car allowance which i believe is before tax and would be £4800 per year.

As far as my understanding is, A car allowance is just additional salary so is taxed just like normal salary. If i do any business mileage then i would be able to claim something on business mileage from HRMC.

What i like to know if i can use car allowance on personal mileage like travelling to work?


Edited by sdyson31 on Saturday 23 April 11:51


Edited by sdyson31 on Saturday 23 April 15:36

Countdown

39,685 posts

195 months

Saturday 23rd April 2016
quotequote all
Nope. Commuting to and from a permanent place of work is not a valid business expense.

sdyson31

Original Poster:

156 posts

124 months

Saturday 23rd April 2016
quotequote all
Countdown said:
Nope. Commuting to and from a permanent place of work is not a valid business expense.
I am not asking to claim something on personal mileage. I believe car allowance is just like a cash and i can spend whereever i want.

This is what i have been told by HR so far;



The car allowance payment would be £400 per month- which is paid as an addition to any salary and is taxable as such.

It is then the member of staffs responsibility to fill in an expense form against business miles travelled to recoup directly from HMRC each month for fuel use and wear and tear on their vehicle at a set rate by the government.





Edited by sdyson31 on Saturday 23 April 12:01

Magic919

14,126 posts

200 months

Saturday 23rd April 2016
quotequote all
It's just money like any part of your salary.

LC23

1,285 posts

224 months

Saturday 23rd April 2016
quotequote all
A car allowance is just extra cash to spend as you wish. It seems your Company are saying they are providing you with this cash allowance to cover your motoring costs and they do not allow you to also claim the HMRC rates for business mileage from them?

If so you can still make a claim for this amount from HMRC which effectively reduces your taxable income by the amount claimed so you receive the tax relief on this.

sdyson31

Original Poster:

156 posts

124 months

Saturday 23rd April 2016
quotequote all
LC23 said:
A car allowance is just extra cash to spend as you wish. It seems your Company are saying they are providing you with this cash allowance to cover your motoring costs and they do not allow you to also claim the HMRC rates for business mileage from them?

If so you can still make a claim for this amount from HMRC which effectively reduces your taxable income by the amount claimed so you receive the tax relief on this.
I am not much worry about business mileage as i won't be doing any business traveling. I will be traveling 100 miles each day and wanted to get an idea if this would cover my petrol cost.

mph1977

12,467 posts

167 months

Saturday 23rd April 2016
quotequote all
sdyson31 said:
LC23 said:
A car allowance is just extra cash to spend as you wish. It seems your Company are saying they are providing you with this cash allowance to cover your motoring costs and they do not allow you to also claim the HMRC rates for business mileage from them?

If so you can still make a claim for this amount from HMRC which effectively reduces your taxable income by the amount claimed so you receive the tax relief on this.
I am not much worry about business mileage as i won't be doing any business traveling. I will be traveling 100 miles each day and wanted to get an idea if this would cover my petrol cost.
that explains where there is salary allocated as car allowance then as pure perk company cars are not very tax efficient.

Countdown

39,685 posts

195 months

Saturday 23rd April 2016
quotequote all
sdyson31 said:
I am not much worry about business mileage as i won't be doing any business traveling. I will be traveling 100 miles each day and wanted to get an idea if this would cover my petrol cost.
Apologies as I'm not sure what exactly you're asking.

Your employer is giving you £400pcm. How much do you spend on petrol per month? If it's less than £400 it will cover the cost..... confused

You don't do any business mileage so you can't reclaim anything either from your employer or from HMRC.

You can't claim back the costs of commuting to work either from your employer or from HMRC.

I'm not even sure why your employer is referring to it as car allowance as they won't get any NI savings unless you claim some business mileage.

mph1977

12,467 posts

167 months

Saturday 23rd April 2016
quotequote all
Countdown said:
<snip>

I'm not even sure why your employer is referring to it as car allowance as they won't get any NI savings unless you claim some business mileage.
legacy issue for the grade ?

used to have a perk car , tax situation made it untenable, managemet stuffed mouths with gold to shut the moaning minnies up by bunging them a few grand a year and saves all the hassles of managing none essential fleet ( whetherthey manage it themselves or leased through the compnay)

Mattt

16,661 posts

217 months

Saturday 23rd April 2016
quotequote all
In short it's just like salary but you get no pension etc on it.

MagicalTrevor

6,476 posts

228 months

Saturday 23rd April 2016
quotequote all
Mattt said:
In short it's just like salary but you get no pension etc on it.
Exactly this. Cheap way for the company to pay you £4500 extra without the burden of pension and, I believe, NI.

AB

16,969 posts

194 months

Sunday 24th April 2016
quotequote all
Sorry to jump in with a slightly different question.

I've always had a company car until recently. I'm paid £600pcm and I lease a car with it which I use for work. I'm paid 25ppm for business use including commuting because my contract states I'm home based.

I've noticed people mentioning tax relief but I've never really looked into it.

For simplicity say I've done 20,000 miles and I've been paid 25p for all of them. I can claim tax relief on the 20p difference between 45p and 25p for those 10,000 miles so on £2,000?

Is that at 20% or 40% as a higher rate tax payer?

I've actually done closer to 30k miles in the last 10 months so this could be a worthwhile exercise.




Eric Mc

121,768 posts

264 months

Sunday 24th April 2016
quotequote all
I presume the car is technically your car and not in the name of your employer.

If that is the case, you can claim an additional 20p per mile from HMRC to bring the overall claim up to 45p per mile.

HMRC will NOT refund you 20p per mile. You will get a tax refund based on a tax relief claim of 20p per mile.

For example, if you had 6,000 business miles in the year, you could make a tax relief claim of 6,000 x 20p = £1,200.

If you are a basic rate tax payer, the tax refund due back to you would be £1,200 @ 20p = £240.
If you are a higher rate tax payer, the refund would work out at £480.

You can make a claim going back three tax years.

As you have done 30,000 (at least), the situation would be different for you.

The 45p per mile allowance relates to business miles up to 10,000 miles. Over 10,000, the mileage allowance drops to 25p per mile.

If your mileage stayed at 30,000 for (say) tax year 2016/17, your employer will have paid you 30,000 @ 25p = £7,500.

HMRC would have allowed you to claim 10,000 @ 45p and 20,000 @ 25p. This works out at £9,000. Therefore, you could make a separate tax relief claim to HMRC for the underclaim of £1,500.

Mattt

16,661 posts

217 months

Sunday 24th April 2016
quotequote all
What kind of commuting are you being reimbursed for?

P87 is the form you need.

Eric Mc

121,768 posts

264 months

Sunday 24th April 2016
quotequote all
If it's commuting, it's not "business related" and he should be taxed in full on what he is getting from his employer.

LC23

1,285 posts

224 months

Sunday 24th April 2016
quotequote all
sdyson31 said:
I am not much worry about business mileage as i won't be doing any business traveling. I will be traveling 100 miles each day and wanted to get an idea if this would cover my petrol cost.
Your car allowance will be subject to PAYE and NI at your marginal rates. This will give you your net cash. Check your actual MPG on the car you are using, compare it to the net cash, does it cover the fuel?

I think that is what you are actually asking but I am confused as you started on about business mileage in your first post then say you aren't fussed as you won't be doing any business mileage.

AB

16,969 posts

194 months

Sunday 24th April 2016
quotequote all
Eric Mc said:
If it's commuting, it's not "business related" and he should be taxed in full on what he is getting from his employer.
Visiting the office for team meetings etc, not as a permanent place of work. That's not commuting is it?

Eric Mc

121,768 posts

264 months

Sunday 24th April 2016
quotequote all
It usually is.

Have a read the Samadian case which clarified HMRC's interpretation of what "commute" really means.


http://www.rossmartin.co.uk/sme-tax-news/1045-not-...

48Valves

1,926 posts

208 months

Sunday 24th April 2016
quotequote all
OP, I would say it depends on what the company rules are.

Where I am now my car allowance can be spent on any car I like, I don't even need to spend it on a car it's just seen as extra cash paid to me.

However my last place and at many others there are restrictions on what the allowance could be spent on. Co2, age, number of doors etc. That said, I could have spent £100 per month on a cheap lease and used the rest for running costs and pocketed the remaining cash.

alec1975

60 posts

104 months

Sunday 24th April 2016
quotequote all
48Valves said:
However my last place and at many others there are restrictions on what the allowance could be spent on. Co2, age, number of doors etc. That said, I could have spent £100 per month on a cheap lease and used the rest for running costs and pocketed the remaining cash.
This is strange, you should be able to spend car allowance where ever and how you want.