Company car scheme, what does this mean?
Discussion
Just started with a new employer and they have made me an offer which includes a car allowance. The allowance offer is net (nett?) but what does this mean?
I also get a business mileage rated at pence per mile from 0-5000 miles, 5001-10000 miles etc.
It also says "the car allowance includes the difference between you business mileage rate and the inland revenue approved mileage rates therefore you are unable to claim the difference from HMRC. This will be shown as running costs on the payslip"
Can someone explain what all the above means? I just want to go looking at cars to buy, but am unsure of how much I can spend.
Thanks in advance.
I also get a business mileage rated at pence per mile from 0-5000 miles, 5001-10000 miles etc.
It also says "the car allowance includes the difference between you business mileage rate and the inland revenue approved mileage rates therefore you are unable to claim the difference from HMRC. This will be shown as running costs on the payslip"
Can someone explain what all the above means? I just want to go looking at cars to buy, but am unsure of how much I can spend.
Thanks in advance.
Sounds complex ;-)
I think you'll have an allowance (pre tax) you'll pay tax on that allowance at the prevailing rate (40p in the pound if you're higher rate taxpayer).
The Inland revenue allow you to claim business milage as a tax deduction at 45p per mile for the first 10,000 and then 25p thereafter. but you must take off this any business mileage expense your employer gives you.
Mine has mileage rates of say 15ppm and so I claim that as part of my expenses and claim the remainder (30ppm for first 10K and 10ppm for the remainder) as part of my self assessment.
It sounds like your employer is paying you the whole 45/25p ..
The 45/25p is designed to pay for depreciation, fuel and wear and tear for business use, as opposed to personal.
does your allowance vary with business miles? it's not the easiest one to work out...
Simes.
I think you'll have an allowance (pre tax) you'll pay tax on that allowance at the prevailing rate (40p in the pound if you're higher rate taxpayer).
The Inland revenue allow you to claim business milage as a tax deduction at 45p per mile for the first 10,000 and then 25p thereafter. but you must take off this any business mileage expense your employer gives you.
Mine has mileage rates of say 15ppm and so I claim that as part of my expenses and claim the remainder (30ppm for first 10K and 10ppm for the remainder) as part of my self assessment.
It sounds like your employer is paying you the whole 45/25p ..
The 45/25p is designed to pay for depreciation, fuel and wear and tear for business use, as opposed to personal.
does your allowance vary with business miles? it's not the easiest one to work out...
Simes.
What they're doing is paying you say £500 a month net. I.e after tax.
Then they're knocking off the difference between what they pay you per mile and the 45p and giving it you back as running costs, saving themselves the employers ni on this summer.
Our lot do something similar, but include the tax relief in the running costs bit.
They then make a big deal about how you get relief straight away without having to fill in the p87(iirc), but conveniently forget to mention that they're saving the ni
Then they're knocking off the difference between what they pay you per mile and the 45p and giving it you back as running costs, saving themselves the employers ni on this summer.
Our lot do something similar, but include the tax relief in the running costs bit.
They then make a big deal about how you get relief straight away without having to fill in the p87(iirc), but conveniently forget to mention that they're saving the ni
Thanks guys. So, the fact that it's net, does that contribute to my salary earnings at all?
They've offered £** and the car allowance offer is for £*k net, will this push me into a higher tax (40%) bracket? Also how does the mileage contribute to this?
Does the 2012/13 tax band reduction to £34,370 affect this?
I think I'll be better off saying, give me £**k and a £*k car allowance. Would that be better, or would I still be pushed into the higher tax bracket?
The mileage offer is;
If not, I'll probably only do 5000-7000 business miles a year (which is roughly £****) how does this affect the above?
Your help is appreciated!
They've offered £** and the car allowance offer is for £*k net, will this push me into a higher tax (40%) bracket? Also how does the mileage contribute to this?
Does the 2012/13 tax band reduction to £34,370 affect this?
I think I'll be better off saying, give me £**k and a £*k car allowance. Would that be better, or would I still be pushed into the higher tax bracket?
The mileage offer is;
- **
If not, I'll probably only do 5000-7000 business miles a year (which is roughly £****) how does this affect the above?
Your help is appreciated!
Edited by Nuisance_Value on Thursday 1st March 22:54
Nuisance_Value said:
Does business mileage include going to and from a regular place of work (head office, not site)?
No.The rest of it is too variable depending on your own circumstances, and we don't know what they are. You have to take away your personal allowance before you pay tax so in practice you need to be grossing well over £40K (including the gross value of the car allowance) before you pay tax at 40%.
The band goes down next year, but personal allowances are going up so it's overall the same.
Also any pension contributions you make will reduce your tax liability, but things like private health care will increase it.
How big is your new employer? Your suggestion of re-arranging how the allowance is paid is likely to get short shrift.
Is there a company car option available? For basic rate tax payers it's usually a no brainer to take it.
You need to get with someone in HR to go through it with you.
Deva Link said:
No.
The rest of it is too variable depending on your own circumstances, and we don't know what they are. You have to take away your personal allowance before you pay tax so in practice you need to be grossing well over £40K (including the gross value of the car allowance) before you pay tax at 40%.
The band goes down next year, but personal allowances are going up so it's overall the same.
Also any pension contributions you make will reduce your tax liability, but things like private health care will increase it.
How big is your new employer? Your suggestion of re-arranging how the allowance is paid is likely to get short shrift.
Is there a company car option available? For basic rate tax payers it's usually a no brainer to take it.
You need to get with someone in HR to go through it with you.
Yeah, I mailed them today, but will try and speak with HR tomorrow. They are a big employer. I'm not really interested in a company car, would much rather take the allowance, but you intimate that I wont get pushed into the higher bracket, which means the car shopping on Saturday can commence!The rest of it is too variable depending on your own circumstances, and we don't know what they are. You have to take away your personal allowance before you pay tax so in practice you need to be grossing well over £40K (including the gross value of the car allowance) before you pay tax at 40%.
The band goes down next year, but personal allowances are going up so it's overall the same.
Also any pension contributions you make will reduce your tax liability, but things like private health care will increase it.
How big is your new employer? Your suggestion of re-arranging how the allowance is paid is likely to get short shrift.
Is there a company car option available? For basic rate tax payers it's usually a no brainer to take it.
You need to get with someone in HR to go through it with you.
Thanks for your help.
Nuisance_Value said:
Just started with a new employer and they have made me an offer which includes a car allowance. The allowance offer is net (nett?) but what does this mean?
I also get a business mileage rated at pence per mile from 0-5000 miles, 5001-10000 miles etc.
It also says "the car allowance includes the difference between you business mileage rate and the inland revenue approved mileage rates therefore you are unable to claim the difference from HMRC. This will be shown as running costs on the payslip"
Can someone explain what all the above means? I just want to go looking at cars to buy, but am unsure of how much I can spend.
Thanks in advance.
I think it means you'd be better off getting a new bike as part of their cycle-to-work scheme? HTHI also get a business mileage rated at pence per mile from 0-5000 miles, 5001-10000 miles etc.
It also says "the car allowance includes the difference between you business mileage rate and the inland revenue approved mileage rates therefore you are unable to claim the difference from HMRC. This will be shown as running costs on the payslip"
Can someone explain what all the above means? I just want to go looking at cars to buy, but am unsure of how much I can spend.
Thanks in advance.
Years ago ,I had a company car ,when HMRC started to get funny. Till then we'd knocked off 200m a month as private.Then came the decision that home to first job was personal .As we got stuff sent out by red star, we made our first journey to the Red star depot. Job done .Don't know if this still applies .
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